AlwaysFree: Thai SCG Q3 Financial Results Summary

According to SCG Chemicals website Analyst Conference Q3/2022 presentation published on October 27, 2022:

Summary

Earnings delivery, liquidity enhancement, growth execution including the creation ASEAN’s biggest logistics business

• Reported Q3/22 profit of 2,444 MB, -75% q-o-q driven by chemicals trough and cost push at Cement-Building Materials business 

• High energy market volatility with gas prices reaching record high, coal prices rebounding, and fluctuating oil prices.  

• China’s zero-Covid policy caused delayed economic reopening, driving down demand and petrochemical prices    

• More uncertainties lie ahead amid slowing global growth, recession fear, rising geopolitical temperature, and production cut by OPEC+

• In response, SCG will continue to aggressively optimize cost, raise cash, cut capex, protect liquidity, drive ASP increase, and achieve more energy savings. Actions taken in Q3/22 include: 

• Optimizing SCGC’s operations and issuing 30 Billion Baht debenture in September ‘22 
• Reducing capex by an additional 15,000 MB in Q3/22, lowering 2022E to 55,000 MB from 80,000 MB at start of the year
• Maintaining low net D/E of 0.6, nearly 70 Billion Baht in cash, available credit facility, and no debt covenants 
• Continually raising cement price and increasing proportion of alternative fuel use to achieve additional energy savings 

• SCG will also go on offense in executing strategic moves to secure longer-term growth. Examples include:

• The creation of ASEAN’s biggest logistics business via SCG Logistics’ partnership with JWD 
• SCGC’s establishment of JV with Denka to produce acetylene black (used for Li-ion battery)  
• SCGP’ acquisition of packaging material recycling businesses in Netherlands (Peute Recycling) and the U.S. (Jordan Trading)
• These are in addition to continued progress towards LSP project completion and the receipt of SGCC’s IPO application approval

Highlighted Situations and Key Priority Actions

Situations

• Energy market volatility with record-high gas price, high level of coal price, and fluctuating oil prices  
• Inflation and interest rate hikes impacting consumers’ spending and creating recession prospect
• Trough in chemicals business cycle exacerbated by weak product demand due to delayed economic reopening in China 
• Continued cost-pushed environment for Cement-Building Materials Business  
• Resilient SCGP despite negative environment

Key Priority Actions

• Capacity management in Chemicals
• Cost reduction through optimized feedstock portfolio, increased alternative fuel use, lean and automation 
• CAPEX reprioritization, lowering planned spending by an additional 15,000 MB 
• Expedite NPD and HVA sales to supplement revenues and profit
• Strategic growth executions: 
• Creation of ASEAN’s largest logistics business via partnership with JWD
• JV with Denka to produce acetylene black (component of Li-ion battery)
• Acquisition of packaging material recycling businesses in Netherlands and the U.S.

Consolidated Results

Q3/22 Revenues from Sales

Revenues increased y-o-y mainly from higher product prices of Cement-building Materials and SCGP, while dropped q-o-q mainly from lower product prices and sales volume of SCGC.

Q3/22 EBITDA

EBITDA decreased q-o-q and y-o-y mainly due to lower contribution from SCGC on lower chemicals gaps and Cement-Building Materials business on higher energy cost.

Q3/22 Profit for the Period

Profit dropped q-o-q and y-o-y was driven by lower contribution from SCGC on lower chemicals gap and Cement-Building Materials business on higher energy cost.

9M/22 Consolidated Results

Revenues increased y-o-y due to higher sales from all three businesses while EBITDA and Profit dropped mainly from increased feedstock and energy cost and lower chemicals equity income.

9M/22 Sales destination: Regional and international footprint

Sales to ASEAN and non-ASEAN destinations increased y-o-y with efforts made to target markets that still grew.

9M/22 HVA, New Products, and Service Solutions

HVA

Generates higher margins over mainstream products, enabling superior profitability over industry peers

Consistently high HVA proportion at 34% of sales

New Product Development (NPD) 

Responds to fast-changing market and customers' requirements

NPD proportion rose to 17% thanks mainly to new cement and building materials products

Service Solutions

Solve customer’s pain points, improve quality attributes, and increase sales

Increase service solutions proportion at 6% of sales

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