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BANGKOK: Siam Cement Pcl, Thailand’s largest industrial conglomerate, is finally catching up with the capacity it overbuilt before the Asian financial crisis as it feeds demand from frontier markets including Myanmar and Cambodia.
The company’s rapid growth is emblematic of Southeast Asia’s rise, where countries such as the Philippines, Indonesia and Thailand currently ranks among the world’s strongest economies. With that economic growth comes demand for the building and packaging materials that Siam Cement makes.
At the height of the Asian financial crisis in 1998, Thailand used less than 60% of its cement capacity, which peaked at 56 million tonnes, far outstripping demand. Capacity has held steady since then, but now as much as 90% is used, and Siam Cement plans to expand its production capability in 2015, which would be the first increase since the 1990s.
Myanmar, Cambodia and Laos have a cement shortage and must import supplies, while demand in Indonesia and Thailand — Southeast Asia’s two biggest economies — is expected to rise 10% this year because of big infrastructure projects.
Siam Cement, the region’s second largest cement maker after Swiss company Holcim Ltd, was expected to report later yesterday that second quarter net profit doubled, which would bring the first half earnings growth to 70%, according to eight analysts surveyed by Reuters.
For the full year, analysts expect a 39% rise in net profit to 32.9 billion baht (RM3.4 billion), which would be the highest since 2010.
Indonesian rival Semen Indonesia Tbk reported a 23% increase in first half net profit on Tuesday.
While Thai companies including top oil and gas company PTT Pcl have scaled back investment after a slump in Southeast Asian exports, Siam Cement maintained its five-year capital spending budget at 200 billion baht as part of its drive to capture growth around the region.
“Our investments will focus on Indonesia, Vietnam and Myanmar, which are our strategic countries,” CEO Kan Trakulhoon told Reuters in a recent interview.
The Thai firm’s investments reached 47 billion baht last year, the most since 1997 when capital spending hit a record high of 61.3 billion baht. Its net debt-to-Ebitda ratio, a measure of gearing, stood at 2.7 at the end of March, compared with 9.2 at the end of 1997. — Reuters
This article first appeared in The Edge Financial Daily, on August 1, 2013.
