SCG to reduce costs and suspend certain businesses as profits plunge
While not in financial difficulty, conglomerate sees need to tighten belt to ensure greater profitability in the longer term
Thai cement and building material conglomerate Siam Cement Group (SCG) says it is preparing plans to reduce costs and boost liquidity to deal with a drop in its nine-month performance this year.
Though the company’s revenue for the period was 380.66 billion baht, similar to the previous year, its earnings before interest, tax, depreciation, and amortisation (EBITDA) was 38.76 billion baht, down 10% year on year.
Meanwhile, the company’s profit was 6.85 billion baht, down 75% YoY, due mainly to spending on Long Son Petrochemicals in Vietnam, as well as a decline in capital gains and associated companies’ profits.
In the third quarter alone, SCG generated 128.19 billion baht in revenue and 9.87 billion baht in EBITDA. The company generated 721 million baht in profits, down 81% year on year due to currency exchange losses.
The company’s president and CEO Thammasak Sethaudom predicts that revenue will rise by only 3% this year due to global economic volatility, negative sentiment on the petrochemical industry, the Middle East conflict, the influx of Chinese products, and the volatility of the baht.
The company is therefore planning to cope with these risks by reducing costs by 5 billion baht in 2025, and working capital by 10 billion baht within the first quarter.
The company also plans to sell assets to boost its liquidity and enhance production efficiency to maintain EBITDA, by increasing consumption of alternative fuels in cement plants by 50% and adopting robotics for tile production.
Businesses that are not generating profits, such as SCG Express parcel delivery service and Oitolabs Technologies Private Limited (Oitolabs), an India-based digital technology and software firm acquired by SCG Cement-Building Materials, will be suspended, with the possible suspension of others to be decided in mid-2025.
According to Krungthep Turakij, SCG Express suffered losses for five consecutive years, including 305 million baht in 2019, 216 million baht in 2020, 202 million baht in 2021, 247 million baht in 2022, and 184 million baht in 2023.
SCG confirmed that the company still has a strong cash flow of 48 billion baht, of which 34 billion baht had been allocated for investment this year.
Additionally, the company would gain positive sentiment from Chinese economic stimulus measures and the Thai government’s budget.
However, the company would be closely monitoring the risks from the US presidential election’s impact on the influx of Chinese products in Thailand, the Middle East conflict’s impact on fuel costs, and the baht volatility.
“We just need to be patient to cope with this year and next year's risks because we still have funds. But we should reduce costs to gain long-term profits,” Thammasak said.
He added that the company is continuing to invest in ASEAN, noting that nine-month sales in the region surged by 10% year on year.
