SCG, a leading conglomerate from Thailand, found COVID-19 disrupted its markets at home and abroad in 2020-21. Its FY21 results continued to be impaired by the Omicron variant, but the company is pushing ahead with its Green Choice programme of investments and remains optimistic that it can benefit from the improved economic forecasts for domestic construction growth in 2022.

SCG's FY21 results reported a four per cent decline in grey cement demand in Thailand. Residential, commercial and infrastructure cement demand all saw a downturn YoY by five, seven and one per cent, respectively. The building product company also saw a five per cent fall in ready-mix concrete demand and a zero YoY demand growth in housing products and ceramic tiles.

Domestic sales start to pick up
Overall domestic sales from distribution and retail, housing products and living solutions as well as cement and construction solutions increased in FY21 to THB120,481m (US$3684m), up six per cent from THB113,635m. The main increases were in the cement and construction solutions division (grey cement, ready-mix, mortar, white cement and refractories), which overall advanced by four per cent YoY.

Indonesia props up overseas markets
Overseas cement demand offered little respite for the conglomerate as it saw cement demand slip by 22 per cent in Myanmar and by nine per cent in Cambodia in FY21. Vietnam similarly saw a decline of two per cent YoY. However, Indonesia’s cement demand rose by two per cent when compared with FY20.

A better year for revenue
Despite the difficult domestic scene, the company's cement revenues increased to THB182,529m, up from THB171,720bn in FY20. The company's 4QFY21 EBITDA decreased YoY to THB4795bn from THB5124m in 4QFY20, due to improving, yet still weak domestic demand despite being partially offset by stronger export sales to regional markets.

SCG’s net debt (excluding projects under construction) rose to THB1.1bn from THB1bn in FY20 and leverage rose YoY by 2.6 times, mainly on increased debt due to growth investments. SCG’s capex investment for the cement and building materials sector was THB9.17bn or 10 per cent of the group's total capex spending.

Going forward, SCG stated “demand in 1Q22 is expected to improve from the 4Q21 thanks to recovering economic sentiment both domestically and globally, subject to the Omicron variant being under control.

"The government sector is forecast to continue to be the main driver of domestic cement demand while residential and commercial sectors should slowly improve," added SCG. 

Plans for 2022 include the implementation of Industry 4.0 and automation to compensate for inflationary pressures and to ease supply chain tightness. The company also aims to improve fuel cost management by securing additional alternative fuel supplies from various locations to serve cement plants at competitive rates. 

Environmental social governance (ESG)
Environmental social governance (ESG) is becoming increasingly a priority for SCG as it is for many other building material companies. The group has committed to reaching net zero by 2050 and has set up a pathway to reduce greenhouse gas emissions by 20 per cent by 2030.

SCG's Green Choice programme has seen a 66 per cent YoY increase in investment to THB215,951m in FY21, up from THB130,389m in FY20. Meanwhile, greenhouse gas emissions had decreased in the 11MFY21 to 30Mt CO₂, down 4.1 per cent YoY compared to 31.3Mt of CO₂ in the equivalent 11-month period of FY20.

In terms of transition to an increasing use of alternative fuel use in cement production, SCG has set a target of 50 per cent by year-end 2022.

Summary
In October 2021 the IMF has forecast Thailand to see real GDP improve from -5 per cent in 2020 to zero in 2021, rising to 4.5 per cent growth in 2022. The ASEAN region is expected to see GDP rise to 5.5 per cent in 2022 from 2.6 per cent growth in 2021, according to the IMF.

While this is a promising start to economic revival in Thailand and the wider ASEAN region, the construction sector is also set to see a state injection of investment and infrastructure programmes that are estimated to see domestic construction grow by six per cent to THB850bn in 2022, according to Civil Engineering Plc. Some 40 mega investment projects costing THB1.4trn are being fast-forwarded by the government. These include a high-speed rail link connecting three airports and the third phase development of Laem Chabang and Map Ta Phut deep seaports. Of the 27 new projects to be started in 2022, 12 will involve building road infrastructure (THB281.2 bn), one will focus on land transport (THB1.36bn), five will be for rail transport (THB624.87bn), five will involve sea transport (THB7.56bn), and four will target air travel (THB59.48bn).

With such large public construction projects being actioned in 2022, SCG can look forward to an improved domestic performance.

Published under Cement News