27 January 2011 07:49 [Source: ICIS news]
SINGAPORE (ICIS)--The core earnings of Thailand’s Siam Cement Group (SCG) are expected to surge further in 2011 on the back of a strong performance last year, partly due to healthy demand for polyolefins and high local consumption of cement and paper, analysts said on Thursday.
SCG on 26 January said its fourth-quarter net profit had more than tripled to baht (Bt) 16.7bn ($542m), having booked a hefty sum largely from the sale of its stake in PTT Chemical.
The net profit beat Bangkok-based brokerage house KGI Securities’ estimates by 11%, according to Nat Panassutrakorn, an analyst with the firm.
Meanwhile, DBS Vickers Securities said SCG’s fourth-quarter results beat its forecast by 14%, according to an investor note by the brokerage house on Thursday.
Excluding a one-time gain from selling its stake in PTT Chemical, SCG’s fourth-quarter net profit would have been Bt6.7bn, up 26% from Bt5.3bn in the same period of 2009.
“This was due to capacity expansions in its chemical and paper units, which helped increase revenues by 23% year on year and offset a squeezed margin, particularly from its chemical unit,” Panassutrakorn said.
SCG’s net profit was expected to increase from Bt27.3bn in 2010 to Bt32bn in 2011, due to increased capacity at its chemical unit and a recovery in its cement and paper units, according to Panassutrakorn.
The company’s 2010 net profit surged 54% to Bt37.4bn as sales grew 26.2% to Bt301.3bn.
“We anticipate capacity ramp-ups of 80-90% for the MOC (Map Ta Phut Olefins Co) and 100% for the 800,000 tonne/year ROC (Rayong Olefins Co) crackers to help meet demand for its new product lines of specialty elastomers and propylene oxide (PO),” he said.
SCG’s new downstream projects include a 220,000 tonne/year specialty elastomers unit, a 390,000 tonne/year PO plant and a 90,000 tonne/year methyl methacrylate (MMA) plant, according to DBS Vickers.
ROC is a joint venture between SCG and US chemical giant Dow Chemicals. ROC owns and operates MOC at the Mab Ta Phut industrial estate in Rayong province.
MOC runs a 900,000 tonne/year cracker at the site.
Ramping up the crackers would allow SCG to increase the proportion of high value-added products to sales from 29% in 2010 to 50% over the next five years, Panassutrakorn said.
Strong demand for polyolefin products amid declining naphtha prices in the second half of 2011 would also help the high density polyethylene (HDPE) to naphtha and polypropylene (PP) to naphtha spreads stay high at $500/tonne (€365/tonne) and $530/tonne respectively, the analyst said.
“In addition, high local consumption of cement and paper would allow SCG’s 2011 net profit without non-recurring items to increase 17.2% year on year to Bt32bn,” Panassutrakorn added.
SCG’s earnings growth would gain momentum in the second half of 2011, led by the MOC and ROC crackers that have yet to run at full capacities pending the start-up of some downstream facilities in the middle of this year, said Naphat Chantaraserekul, an analyst with DBS Vickers.
The spread for HDPE, a key product for SCG, would remain weak at $450/tonne due to the ramp-up of new capacities in China and the Middle East, but should improve in the second half of 2011 with the global economic recovery, he said.
“HDPE prices remain relatively strong currently,” he added.
Meanwhile, cement demand for infrastructure projects could accelerate in the second half of the year, supported by government stimulus packages and the construction of a mass transit system network, Chantaraserekul said.
“We conservatively estimate that domestic demand growth [for cement] would be 10% in 2011, versus 8% in 2010,” he added.
SCG was estimated to book a net profit of Bt33.95bn, with sales expected up 19% year on year to Bt359.2bn, according to DBS Vickers.
SCG has four major businesses under its wing - chemicals, cement, paper and building materials.
The firm’s investor relations department could not be immediately reached for comment.
($1 = Bt30.83, $1 = €0.73)
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