SCG’s Operating Results for Q3 2019 and the first nine months of 2019 showed a decline in profits compared to the same period last year. The Q3 results are primarily driven by the drop-in profitability in the Chemicals Business due to the existing low cycle and the global economic slowdown that was exacerbated by the trade war and the appreciation of Thai baht. Meanwhile, the Cement Building Materials Business reported an increase in profit with sales growth in the Distribution and Retail Businesses. Moreover, the Packaging Business has a significant potential growth, particularly in the ASEAN region.
Roongrote Rangsiyopash, President and CEO of SCG, disclosed, “The company’s unaudited Operating Results for Q3 2019 registered the Revenue from Sales of PHP185,772 million (US$3,593 million), a decrease of 10% y-o-y primarily due to lower chemicals product prices but a 1% increase q-o-q. Meanwhile, profit for the period totaled PHP10,446 million (US$ 202 million), a drop of 35% y-o-y (12% q-o-q) caused by the lower performance of the Chemicals Business due to the lower product margins, Deferred Tax Assets reversal amounting to PHP1,790 Million (US$ 35 Million) and reduced equity income from the major turnaround of an associated company. Another factor is the global economic slowdown spawned by trade war tensions (between?) and Thai Baht appreciation combined with the company realized an assets impairment of PHP1,283 million (US$ 25 Million), of which PHP1,078 Million (US$ 21 Million) loss was from the Cement-Building Materials Business mainly from the regional non-Thai Ceramics Business. Without the recognition of the Deferred Tax Assets reversal, SCG would have recorded PHP12,236 million (US$ 237 Million) in Profit for the Period, a drop of 23% y-o-y but an increase of 3% q-o-q.
As for Operating Results for the first nine months of 2019, SCG registered Revenue from Sales of PHP 550,954 Million (US$ 10,598 Million), a decrease of 8% y-o-y due to lower chemicals prices. Profit for the period totaled PHP 41,363 Million (US$ 796 Million), a drop of 27% y-o-y. In this regard, the notable transactions during the first nine months of 2019 were the Q2 2019 Severance Pay Adjustment (Labor Law) of PHP 3,347 Million (US$ 64 Million), the Q3 2019 Deferred Tax Assets Reversal of PHP 1,790 Million (US$ 35 Million), the Q3 2019 assets impairment of PHP 1,283 Million (US$ 25 Million) mainly from the regional non-Thai Ceramics Business, and the global trade war concerns that continues to affect the margins of both subsidiaries and associated companies.
SCG’s Revenue of High Value-Added Products & Services (HVA) Sales for Q3 2019 reached PHP 74,844 Million (US$ 1,447 Million), accounting for 40% of the total Revenue from Sales, down 8% y-o-y and 6% q-o-q. As a result, Revenue from Sales of HVAs for the first nine months of 2019 amounted to PHP 227,614 Million (US$ 4,379 Million) or 41% of total Revenue from Sales, declining 2% y-o-y.
SCG’s Revenue from performance businesses outside of Thailand, including export sales from Thailand, in the first nine months of 2019 registered PHP 223,372 Million (US$ 4,297 Million) or 41% of total Revenue from Sales, a dip of 12% y-o-y.
SCG in ASEAN (ex-Thailand)
For SCG’s operation in the ASEAN (ex-Thailand), Revenue from Sales in Q3 2019 recorded a 2% decline y-o-y at PHP 50,978 Million (US$ 986 Million), which is 27% of SCG’s total Revenue from Sales. This includes sales from both local operation in each ASEAN market and imports from the Thai operations.
As of 30 September 2019, SCG’s total assets amounted to PHP 1,033,468 Million (US$ 20,000 Million) while the total assets of SCG in ASEAN (ex-Thailand) amounted to PHP 358,130 Million (US$ 6,931 Million), which is 35% of SCG’s total consolidated assets.
In the Philippine market, SCG’s Q3 2019 Revenue from Sales amounted to PHP 4,022 Million (US$ 78 Million), which represents a decrease of 21% y-o-y mainly from Packaging operation and Export from Thailand. For the first nine months of 2019, SCG recorded PHP 12,583 Million (US$ 242 Million) Revenue from Sales in the Philippines.
For the movement in the Philippines, SCG Philippines Country Director Jakkrit Suwansilp assured continuous growth, with the cement-building materials business now shifting from a product-based business model to a solution-based one. In connection with this, SCG started the operation of their own ready-mix plant in Bulacan to serve the increasing demand for concrete and plans to boost growth areas such as Iloilo and Pampanga
In addition, Mariwasa Siam Ceramics, Inc., (MSCI) the Philippines’ leading ceramic tile manufacturer and provider established through a venture with SCG, has launched its own brand of Sanitary Wares and Tile Adhesive to cater to consumers’ surging home requirements. The Mariwasa Sanitary Wares are quality-assured, DTI-PNS-compliant range of products that includes toilets, urinals and basins. In Q3 2019, Mariwasa Sanitary Wares comprised 66.57% total net sale over all non-tile MSCI products, which is equivalent to PHP 34 Million (US$ 667,000).
In adherence to the circular economy concept, MSCI also invested about PHP 98 million (approx. USD 1.7 million) on solar panel roofs, which minimize daytime electricity consumption by up to 180,000kwh, saves up to PHP 1.2 Million in monthly electricity costs and reduces carbon dioxide emission of 132 tons per month. Harnessing solar power through these 116MW-capacity panels is the company’s thrust toward reducing dependence on nonrenewable energy sources.
SCG is also developing an omnichannel platform to provide customers with a convenient way to access information on construction materials. This approach is also designed to boost the construction material industry at all levels.
Roongrote said, “Even though SCG’s operating results for Q3 2019 and the first nine months of 2019 were affected by the reduced profits of Chemicals Business due to the impact of petrochemical low cycle, the Chemicals Business has placed a considerable emphasis on research and development of innovative and High Value-Added Products & Services. The products developed were designed to fit the Circular Economy principles to support global market demands.”
SCG recently showcased its plastic innovations for sustainability, themed under “Passion for a Better World” at K2019, the world’s largest trade fair for plastic and rubber held in Germany. The exhibited innovations include superior-strength polyethylene resins by SCG’s breakthrough SMXTM technology, which minimizes material consumption, the eco-friendly recyclability “Mono-Material Packaging,” and plastic resins made of the mixture of special-grade SCG plastic resins and the Post-Consumer Recycled Resin (PRC), along with SCG service solutions offering cost management and operational efficiency enhancement to boost business’s capabilities and competitiveness.
Meanwhile, the Cement-Building Materials Business has remained instrumental in generating revenue for SCG despite relatively regional weaker ceramics markets. However, SCG instills a heightened focus on accelerating retail and distribution businesses, providing customers with greater access to innovative products and services and diverse solutions effortlessly. In addition, SCG also develops Construction Solutions to enhance efficiency and provide comprehensive solutions for construction needs as well as strengthening Thailand’s construction industry.
For its Packaging Business, SCG will continue to develop and improve its strengths and create opportunities for itself by developing packaging with multi-materials (both fiber-base and polymer-base), along with offering integrated packaging solutions, improving efficiency through digital technology, and collaborating with world-class business partners. SCG has recently been expanding its operations through acquisitions with high growth potential in ASEAN. These acquisitions include Visy Packaging in Thailand and PT Fajar Surya Wisesa Tbk. in Indonesia. The Packaging Business’ aim is to rapidly enhance overall production efficiency, expand its market coverage and increase its range of expertise in Thailand, Vietnam, the Philippines, Malaysia, Indonesia, and other countries within and outside of ASEAN. The Packaging Business’ expansion of its production base in various geographies and of its customer network will enable it to maintain its position as the leading integrated packaging solutions provider that can address our world-class customers’ needs at all levels of operations, from upstream to downstream.