Owing to the rising energy and raw material cost, Thailand's biggest conglomerate, Siam Cement PCL SCC.BK (SCC) is slated to highlight a Q2 operating earnings rise by minimal 2.7%. The higher energy and raw stock costs were offset by the increase in selling prices thereby meagerly increasing the profit margins of its major petrochemical, cement and paper businesses. As per an analyst, quarterly earnings before interest, tax, depreciation and amortisation (EBITDA) at its petrochemicals business would fall 8% to 3.63 bln baht.
The new petrochemical supplies coming form the Middle East will be a major factor pushing the petrochemicals margin spread downhill in H2 of 2008 and start of 2009. This is a significant factor to consider as SCC's 40-50% profits come from petrochemicals business. This year, the net profit was expected to fall 19% to 24.5 bln baht. The group's overall sales were expected to rise 24% to almost 79 bln baht in the quarter, out of which petrochemical sales will rise by 23%. The price of naphtha, used for making petrochemicals, mounted by 50% to US$1,043 per ton in the Q2 compared with a year earlier whereas the spread between polyethylene, its key petrochemical product, and naphtha was US$636 per ton in Q2 up 4% from a year earlier but 13% lower than Q1.