Siam Cement’s 4Q net profit drops, strong sales recovery expected

Thailand’s biggest industrial conglomerate, Siam Cement, recorded an 81 per cent drop in fourth quarter net profit due to the recent typhoon-triggered floods that hit the country last year as well as changes in the treatment of deffered tax. However, the company forecasts robust recovery in 2012 sales on post-flooding reconstruction, with further gains expected should the company complete any acquisitions.

Net profit for the quarter was THB3.2bn (US$101.75m), compared to THB16.7bn a year earlier. On a QoQ basis, profit was down by more than 50 per cent compared to the THB7.38bn recorded in 3Q11.
 
The decline was attributed by analysts to squeezed chemical spreads, the impact of flooding on demand for cement, chemicals and paper, asset write-offs because of flood damage plus expenses related to a reduction in deferred tax assets due to a lower corporate tax rate, Reuters noted.

Last years floods, the worst in 70 years, reduced Thailand’s economic growth to about 1.5 per cent in 2011, compared with estimates of as high as 4.5 per cent before the deluge, Finance Minister Kittiratt Na-Ranong said last week. To help spur a recovery in demand the Bank of Thailand today cut interest rates for the second consecutive meeting also amid concerns of a recession in the euro zone threatening to impact emerging markets. The central bank reduced its one-day bond repurchase rate by a quarter of a percentage point to three per cent

However, Siam Cement forecasts a strong recovery in sales due to post-flood rebuilding. Chief Executive, Kan Trakulhoon, has said he expects strong recovery due to post-flooding rebuilding. "We expect strong demand for restoration from house and business sectors next year," he said, adding most of its affected plants should resume production by the first quarter of 2012.  Management guided that demand for cement in 2012 is expected to increase by 5-10 per cent, while sales of building materials should grow even faster.

The company expects overall sales growth of 12 per cent this year and  Mr Trakulhoon noted that this increase could be even higher if acquisitions are made.  Siam Cement’s board has just approved a plan to issue up to THB25bn (US$793.9m) worth of four-year bonds. Of the proceeds, THB20bn will be used to replace maturing bonds, due April 1, and the remainder will be used to support future investments.