Siam Cement Group's Q4 2010 earnings outlook mixed - brokerage

29 October 2010 06:17  [Source: ICIS news]

SINGAPORE (ICIS)--Siam Cement Group’s (SCG) earnings outlook for the last quarter of 2010 is assessed mixed after the company posted a 6% year-on-year drop in its net profit for the July-September period, DBS Vickers Securities said in a research note on Friday.

The Thai-based conglomerate posted a third-quarter net profit of baht (Bt) 6.56bn ($219m) after weak chemical margins and low cement prices offset strong sales. Sales grew 22% year on year to Bt79.1bn in the third quarter.

SCG’s earnings could improve in the fourth quarter on better spreads from high density polyethylene (HDPE), after prices bottomed out during the preceding quarter at $455/tonne (€328/tonne), said Naphat Chantaraserekul, an analyst at DBS Vickers.

HDPE is a key product for the group’s chemicals business, he said, adding that the unit contributed 44% of SCG’s earnings for the first nine months of 2010.

The company’s earnings could drop in the fourth quarter when its joint venture (JV) 800,000 tonne/year cracker in Mab Ta Phut undergoes a month-long turnaround in November, the analyst said.

However, the impact could be minimised by inventory stockpiling prior to the November turnaround, and ramping up of operations at the company’s other 900,000 tonnes/year cracker to 100%, Chantaraserekul said.

The two crackers, operated by Rayong Olefins Co, is a joint venture between SCG and US chemical giant Dow Chemicals.

In its outlook, DBS Vickers said that the company was expected to register a net profit of Bt29.3bn for the full-year, with earnings at Bt2723bn. Fourth quarter estimates were not immediately available.

“We expect SCC’s (Siam Cement Chemicals) earnings to gain momentum when four new high value-added chemical projects become fully functional in 2011, ensuring more sustainable margins for chemicals,” it added.

($1 = Bt29.94 / $1 = €0.72)

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By: Nurluqman Suratman

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