With increasing energy costs eating into its profitability, Siam City Cement Plc plans to raise its cement prices. The country’s second largest cement maker would not say when or by how much it would raise its prices. But managing director Leo Mittelholzer, said yesterday that he would ask the Commerce Ministry for permission to raise its prices, and once approved it would raise them immediately.
Cement is one of many commodities the prices of which the Commerce Ministry closely monitors. It has ordered manufacturers to maintain their prices to avoid exacerbating inflation. Nevertheless, inflation in July jumped 5.3 per cent compared to July 2004, the highest since October 1998. The sharp spike in diesel fuel prices at the pump that pushed up transportation costs last month is expected to prompt several other manufacturers to raise their prices.
After the price of diesel was floated last month, Siam City Cement like others felt the pinch. Even though its profits grew in the first half, the percentage of income in relation to sales fell.
"We have many reasons to explain why this increase is necessary," he said. Mittelholzer said energy costs account for 56 per cent of the company’s production costs. Fuel accounts for 32 per cent of costs and electricity 24 per cent.
It sold 6.4 million tonnes of cement in the six months ended June 30, of which 4.1Mt were exported and 2.3Mt were sold domestically. Exports - mainly to the Middle East and Vietnam - increased 64 per cent year on year. Although the company has nudged up its domestic retail prices, the increase has not fully covered rising energy costs, particularly when oil prices are expected to continue climbing in the second half of this year, Mittelholzer said.
Siam City Cement predicts domestic cement demand will grow 10 per cent this year and between 8 and 10 per cent in 2006, due mainly to the government’s mega-infrastructure projects. Chantana Sukumanont, executive vice president of marketing and sales for the company, said Thailand used 14.3 million tonnes of cement in the first half and demand should stay the same in the second half.
"The mega projects should boost demand. Right now, our cement supply to government projects accounts for 15 per cent [of government cement purchases], and we hope to maintain this market share once the mega projects and other infrastructure projects start," she said.
