According to the company’s website news release on April 25, 2023, SCG reported Q1/23 Revenue from Sales of 128,748 MB, an increase of +5% q-o-q from higher Revenue from Sales across all businesses, particularly higher sales volume in Chemicals business following the cracker (ROC) restart in early February. EBITDA registered 12,170 MB, increasing +20% q-o-q, attributed to better performance from Cement-Building Materials and Packaging businesses, as well as higher chemicals spreads and sales volume even the previous quarter was noted by seasonal dividend contribution. Profit for the Period reported at 16,526 MB, increasing 16,369 MB q-o-q mainly from the one-time gain from fair value adjustment of investment in SCG Logistics, following SCGJWD Logistics merger transaction, in Cement-Building Materials business. Profit excluding extra itemsi would have been 4,516 MB, which increased 3,446 MB q-o-q, due to higher spreads and sales volume, as well as lower energy cost.
On a y-o-y basis, SCG reported Q1/23 Revenue from Sales decreasing -16% y-o-y mainly from Chemicals business. EBITDA dropped -31% y-o-y, while Profit for the Period increased +87% y-o-y. Profit excluding extra items would have been -42% y-o-y largely attributable to lower sales volume and equity income in Chemicals business, as well as higher energy cost compared to the previous year.
Packaging business (SCGP) reported Q1/23 Revenue from Sales of 33,729 MB, a decrease of -8% y-o-y. EBITDA registered at 4,474 MB, a drop of -9% y-o-y and Profit for the Period reported at 1,220 MB, decreasing -26% y-o-y.
Equity income in Q1/23 registered at 2,665 MB, an increase of 794 MB or +42% q-o-q. The chemicals portion accounted for 36% of the total equity income, or 955 MB, decreasing 153 MB q-o-q, while the non-chemicals portion accounted for the remaining 64% or 1,710 MB, representing an increase of 947 MB q-o-q.
Total dividends received in Q1/23 amounted to 143 MB, decreasing 1,153 MB y-o-y, with details as follows: a) 112 MB from “Associated” companies (20% - 50% stake), and b) 31 MB from “Other” companies (less than 20% stake).
Continued solid financials, with cash & cash under management of 94,100 MB, compared to 95,402 MB in Q4/22.
Net Working Capital registered at 103,714 MB, a decrease of -2% q-o-q, while inventory turnover period dropped to 68 days, compared to 75 days in the previous quarter (Q4/22).
Business Segments
In Q1/23, Thailand’s total domestic grey cement demand increased +2% y-o-y infrastructure projects are the key engine to drive market growth. Cement demand from the government sector (accounting for 42% of total demand volume) increased +6% y-o-y, and that of residential and commercial sectors (accounting for 58% of total demand volume) were stable compared to the previous year. Meanwhile, the average grey cement price in Q1/23 increased to the average of 2,050 - 2,100 Bt/ton.
In terms of Non-cement products in Q1/ 2 3, housing products (applications for roof and ceiling & wall) showed an upward demand trend of +1% y-o-y thanks to demand for improved situation in tourism sector, while demand for ceramic tiles dropped -2% y-o-y.
For SCG ceramic tiles business (floor and wall tiles), total sales volume in all markets (Thailand, Vietnam, Indonesia, Philippines) in Q1/ 23 registered at 38 million sqm., representing a slightly drop of -8% y-o-y due to lower demand in regional markets. The average price of ceramic tiles for all of SCG’s ASEAN operations increased +11% y-o-y.
In Q1/23, Revenue from Sales of the Cement-Building Materials Business registered at 50,800 MB, close to the previous year, thanks to increased sales volume and commercial strategies which lead to higher sales in both domestic and other markets. EBITDA registered at 5,035 MB, a decrease of 998 MB y-o-y. Profit for the Period reported at 13,463 MB, increasing 10,972 MB y-o-y due to gain from fair value adjustment of investment in SCG Logistics, whereas core Profit for the Period would have been 1,507 MB, a decrease of 984 MB y-o-y mainly due to higher energy cost and raw material cost of building materials.
In Q1/23, the reopening of China provided positive momentum to the global economy amidst numerous macro challenges from high inflations, and numerous interest rates hikes which affected consumer spending, in addition to the banking sector turmoil in western nations. The impact of the reopening was towards increased demand which resulted in higher product prices and chemicals spreads.
Prices of Brent crude oil in Q1/23 decreased $7/bbl to $82/bbl or -8% q-o-q, due to the uncertain global economic outlook, resulting in recessionary concerns and lower demand. However, Naphtha prices rose by $16/ton to $689/ton, or +2% q-o-q, due to tightening supply from the West following Russian sanction and worker strikes at several refineries.
In the Olefins chain in Q1/23, the average HDPE price increased by $52/ton or +5% q-o-q to $1,085/ton and HDPE-Naphtha spread increased by $35/ton or +10% q-o-q to $396/ton. Average PP price increased by $94/ton or +10% q-o-q to $1,069/ton and the average PP-Naphtha spread increased by $78/ton or +26% q-o-q to $380/ton. Higher product prices and spreads were mainly due to China’s demand recovery post-lifted zero COVID-19 policy amid limited supply from producers due to several maintenances.
Following the restart of Rayong Olefins (ROC) in early February, Chemical Business (SCGC) sold approximately 390,000 tons of polyolefin products (PE and PP), increasing +18% q-o-q, while sales volumes decreased by -21% y-o-y.
The Vinyl chain in Q1/23 witnessed average PVC prices that increased by $92/ton or +12% q-o-q to $882/ton, which translated to the average PVC-EDC/C2 spread that grew by $102/ton or +29% q-o-q to $449/ton. This is attributed to the improved PVC uptake from India amid weak demand in China owing to winter lull and Lunar New Year holidays. PVC sales volume in Q1/23 dropped slightly by 4,000 tons or -2% q-o-q to 197,000 tons.
In Q1/23, SCGC’s Revenue from Sales registered 46,805 MB, representing an increase of +8% q-o-q due to higher product prices and sales volume while sales dropped by -32% y-o-y. EBITDA was 2,445 MB, a drop of 379 MB q-o-q and 3,457 MB y-o-y which was mainly due to lower dividend received from associates. EBITDA from Operations was 2,336 MB, increasing 3,578 MB q-o-q due to higher product spread while decreased by 2,319 MB y-o-y. Profit for the Period was 1,356 MB, increasing 2,408 MB q-o-q from improved spreads and sales volume while dropped by 2,232 MB y-o-y. Equity income from associates was 995 MB, decreased by -14% q-o-q and -39% y-o-y. Inventory loss in Q1/23 registered a marginal 51 MB.
Financials
Net debt registered at 267,542 MB in Q1/23, a decrease of 1,302 MB from Q4/22. Net Debt/Equity ratio was 0.6 times (x) in Q1/23, which was similar to Q4/22 and higher than last year, which was 0.5 times (x).
Net finance and interest cost in Q1/23 amounted to 2,241 MB compared to 1,647 MB in Q1/22 and 2,262 MB in Q4/22. However, the average cost of interest in Q1/23 was 3.5%, which was equal to Q4/22, but higher than 2.6% in Q1/22.
CAPEX & Investment in Q1/23 amounted to 8,921 MB, of which 52% was from Chemicals, 19% was from Cement-Building Materials, 19% was from Packaging, and 10% was from Others. The spending was mainly due to on-progress construction of Long Son Petrochemicals Complex. CAPEX & Investment in FY2023 is expected to be in the range 40,000 - 50,000 MB.
The Q1/23 EBITDA generation of 12,170 MB compares to cash outflow of 13,749 MB (CAPEX & Investments of 8,921 MB, dividend payment of 57 MB, interest payment of 3,622 MB and corporate tax of 1,149 MB).
Net Zero
In Q1/23, SCG’s absolute GHG emissions (scope 1+2) was 6.84 million ton CO2. This keeps SCG on track to achieve our 2030 target and is in line with The Science Based Target initiatives (SBTi)’s suggesting that GHG emissions reduce 2.5% per year to be within well-below 2 degrees Celsius scenario.
Although the energy situation is still volatile due to factors such as the ongoing conflict between Russia and Ukraine, as well as the reduction in oil production by the OPEC+ group, which have impacted energy prices, it is also considered as an opportunity to accelerate the transition towards Energy Transition to promote business growth by increasing the use of all forms of clean energy and increasing the proportion of alternative energy sources continuously, such as biomass and Refuse-Derived Fuel (RDF). This transition is accompanied by reducing the use of fossil fuels along with utilizing digital technology, artificial intelligence, and automation systems to enhance production efficiency and energy utilization. In Q1/23, SCG was able to achieve GHG emissions reduction by substituting fossil fuel with alternative fuels, which accounted 23% for all business units and 38% for cement operations in Thailand.
Go Green
Regarding Go Green, Q1/23 Revenue from Sales of SCG Green Choice products, totaling 252 items, was 68,992 MB, accounting for 54 % of the total sales revenue.
The increase in environmentally friendly product offering that directly benefit customers has become more prominent, such as “SCG Hybrick” concrete fence made from recycled materials that help reduce natural resource consumption by at least 10%. “SCGC GREEN POLYMERTM”, a Bio-Compostable Compound Resin made from polyester, and “Fresh Cut Paper Tray” made from renewable materials that account for at least 80% of its composition, making it easier to prioritize environmental sustainability. SCG has set a target for the sales of SCG Green Choice products to reach 2/3 of total Revenue from Sales by 2030.
Reduce Inequality
SCG aims to create jobs and income security by developing skills and capabilities, providing education opportunities, and improving well-being starting from 2022. The target is to reach accumulated 50,000 by 2030, with a goal of 5,600 people in 2023
In Q1/23, SCG has supported the creation of jobs for 1,541 people by collaboration with various organizations and communities. This has been achieved by developing the skills and capabilities of the workforce to meet market demands and increasing business opportunities for entrepreneurs and SMEs. The highlight projects are the "Q-Chang" platform to increase employment opportunities and continuous income for technicians and housemaids, benefiting 924 people; “Siam Saison” providing financial supports for liquidity and business expansion of dealers, contractors and SMEs whose businesses are related to buildings and constructions totaling 35 accounts; and “Siam Validus” which unlocks the potential and chance to grow of 270 Thai SMEs by providing funding sources for Thai SMEs through issuing crowdfunding debentures for investors. Additionally, SCG’s Power of Community project has expanded vocational training for people with disabilities in Lamphun province, also created income and fostering pride for 30 people.
Enhance Collaboration
SCG collaborates with partners from various sectors at national, regional, and global levels to promote cooperation in driving Thailand towards a low-carbon society. This is achieved through the creation of knowledge and stimulation of all sectors to adjust their roles towards energy transition, resulting in equal benefits for society. This approach aims to promote economic growth while conserving natural resources and a sustainable environment.
Highlighted collaborative innovation activities in Q1/23:
- Co-Chairing with PETRONAS in "The ASEAN's Leaders for Just Energy Transition", a newly launched World Economic Forum’s Community after the recent World Economic Forum meeting in Davos, Switzerland, to deliver a Just Energy Transition in ASEAN. This collaboration aims to drive activities for the region’s energy transition towards decarbonization efforts that are pragmatic and fair.
- Collaborating with Sweden Embassy, the Royal Thai Embassy, and partners to promote sustainable global forest management models from Sweden, focusing on the balance between conservation goals and economic development, commercial forestry, and promoting economic growth. The government, private sector, and civil society are encouraged to study and adopt this model to promote sustainability.
- Collaborating with the Office of Natural Resources and Environmental Policy and Planning, Global Cement and Concrete Association, The Engineering Institute of Thailand, Department of Public Works and Town & Country Planning, and Thai Contractors Association to organize “Thailand: The New Chapter of Green Construction Forum 2023” promoting the construction industry to achieve the target of reducing greenhouse gas emissions.
- Collaborating with the Department of Forestry and Lampang Province to make a memorandum of understanding for the sustainable conservation, restoration, and community-based reforestation of 5 community forests covering an area of 3,000 rai and partner with the Department of Marine and Coastal Resources and Trang Province in establishing a pilot model for community-led reforestation in mangrove forest. This model aims to maintain water sources, create food sources, and generate income for the community. It also serves as a natural carbon sink, with carbon storage and emissions reduction assessed in order to register for carbon credits.
- Participating in the PTIT Energy Transition Executive Forum, jointly presented perspectives on Energy Transition in Thailand, with the aim of promoting sustainable development, enhancing the capabilities of the industry, and promoting a just transition. For example, the collaboration with Nippon Steel Engineering to study the feasibility of carbon capture and utilization from emissions released during cement production, and the initiation of "Saraburi Sandbox" project, which aims to establish a net-zero emissions model in Saraburi province which is the largest cement industry in Thailand.
For additional information SCG Sustainability http://www.scgsustainability.com/en/
Corporate governance https://scc.listedcompany.com/cg.html
Link to ESG Profile (New) https://bit.ly/3dLEVVV
