Thailand's biggest conglomerate, Siam Cement has posted 33% dip in Q3 operating profit, attributed mainly to higher production costs that have eroded margins at its petrochemicals unit. The spread between high-density polyethylene (HDPE), SCC's main petrochemical product, and feedstock naphtha slipped US$39/ton to US$692/ton in the quarter from a year ago levels.
This worse-than-expected dip is expected to continue, as rising energy costs will further crush margins in the next quarter. At this rate, the company could miss this year's 5% sales growth target due to weak domestic demand and a strong baht. The baht has gained nearly 6 percent against the U.S. dollar so far this year. Weak economic growth also affected its cement and building materials business and is expected to take o toll on the full-year earnings. The stronger baht , expected to average 34 baht against the dollar this year, will cut at least 3.5 billion baht from its 2007 net profit, despite SCC's projected increase in exports to 33-34% from last year's 30%.
Siam Cement, which gets almost half its profits from petrochemicals, said its quarterly operating profit before non-recurring items fell to 5.63 bln baht from 8.4 bln a year earlier, missing analyst forecasts for 6.38 bln baht. Net profit fell about 1 percent to 7.55 billion baht from 7.59 bln baht a year earlier, again below an average analyst forecast of 8.18 bln baht. The figure included a 1.9 bln baht gain, mainly from the sale of a stake in petrochemical producer Aromatics. Overall sales rose 2 percent to 69.14 bln baht in the third quarter, with cement sales down 0.5%, building materials down 6.3%, paper sales 2.7% higher and petrochemical sales up 4.7%.