SCG announces operating results for Q3/2022

November 03, 2022 | 11:16
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SCG has announced its Q3/2022 operating results, reflecting a drop in sales and profits due to soaring global energy prices and volatility in the market.
SCG announces operating results for Q3/2022
Roongrote Rangsiyopash, president and CEO of SCG (left) and Thammasak Sethaudom, vice president of Finance and Investment and CFO of SCG (right)

In conjunction with the petrochemical trough, the industry has hit its lowest point in 20 years. SCGC has been impacted by the high cost of raw materials and excessive capacity addition causing oversupply. The cement and building materials business also faced skyrocketing energy costs. Nevertheless, SCGP is performing well despite energy fluctuations.

Overall, SCG has a solid financial position due to its rigorous liquidity management and targeted investments in high-potential and sustainable businesses. SCG has entered into three new businesses including renewable energy, ASEAN logistics, and smart living. The strategy seeks to improve quality of life and provide customers and society with convenience, affordability, safety, and environmental responsibility.

Roongrote Rangsiyopash, president and CEO of SCG, disclosed, “SCG's Q3 2022 operating results were significantly impacted by the energy prices that have reached 10-year highs. These are the consequence of the Russia-Ukraine conflict, which has resulted in a significant increase in SCG's energy costs on top of the deepest petrochemical trough in 20 years. A global economic slowdown is expected as global interest rates rise. This will be exacerbated by China's economic downturn as a result of its zero-COVID policy."

SCG is well-equipped to handle this crisis while maintaining solid financial stability. It has scaled back costs and expenses, reassessed investments, and deferred new non-urgent projects.

It focuses on leveraging projects with quick returns that are consistent with its business expansion strategies, such as the LSP petrochemical project in Vietnam – the construction of which has progressed on plan and reached 97 per cent completion. To further strengthen its financial position, debentures totalling $951,000 were also issued in Q3/2022.

Furthermore, the company has accelerated the development of innovations to meet the needs of customers promptly by entering into three new businesses with high potential and addressing the needs of global megatrends.

With regard to renewable energy, SCG seeks to lower costs and speed up renewable energy development by employing biomass from agricultural byproducts and municipal solid waste (refuse-derived fuel or RDF) in place of fossil fuels. In Q3/2022, the cement operations in Thailand used 40 per cent renewable fuel.

Consequently, in the nine months of 2022, the proportion of renewable fuel use has climbed from 18 per cent to 34 per cent on-year and solar energy accounts for 195 megawatts (as of September 2022). SCG has also expanded into solar energy businesses for residential and industrial estate sectors, namely SCG Solar Roof Solutions and SCG Cleanergy Co., Ltd., with an output capacity of 29MW. Electricity can be traded via a smart grid platform with leading public and private sector customers.

SCGC has recently entered into a joint venture agreement with Denka Co., Ltd. in Japan to produce acetylene black – a material primarily used as a component in producing lithium-ion rechargeable batteries for electric vehicles and used in applications for high-voltage transmission cables for use on offshore wind power projects.

In terms of ASEAN logistics, the company merged its logistics business and became ASEAN’s top integrated logistics and supply chain business, offering a wide range of services such as warehousing, cold storage systems, cargo services by land, sea, and air, docking services, and import and export services.

Regarding smart living, the business provides smart innovations for air quality and energy savings, such as SCG Active AIR Quality, SCG Bi-ion, and SCG HVAC Air Scrubber for air quality management, along with innovative smart-home platform technology and Wellness Home Hub to measure and monitor the well-being of residents.

SCG announces operating results for Q3/2022

SCG's unreviewed operating results for Q3/2022 registered revenue from sales of $3.9 billion, a drop of 7 per cent on-quarter, due to lower chemical product prices driven by softer petrochemical demand. Profit for the Period was $68.7 million, a decrease of 75 per cent on-quarter, largely attributable to lower chemical spreads and higher energy costs, together with lower seasonal dividends.

However, on an annual basis, revenue from sales has climbed by 8 per cent, mostly due to higher product prices in line with the market for cement and building materials and SCGP. However, profit for the period declined by 64 per cent on-year due to lower chemical spreads and lower equity income.

In the year to date, SCG has registered revenue from sales of $13 billion, an on-year rise of 15 per cent. This is thanks to higher sales across all businesses and higher product prices in line with the market. Profit for the period totalled $616 million, down 45 per cent on-year as a result of higher feedstock and energy costs as well as lower equity income in the chemicals business.

SCG has modified its HVA products and services strategy by tightening the criteria to increase product competitiveness in the global market. The efforts are to keep up-to-speed when launching products in response to the rapid change in customer needs and to increase profitability.

Under the new criteria, SCG's sales of HVA products and services in the nine months of 2022 amounted to $4.4 billion and accounted for 34 per cent of total revenue from sales. Furthermore, the proportion of new product development and service solutions accounted for 17 per cent and 6 per cent of total revenue from sales respectively.

In addition, SCG's revenue from operations outside of Thailand, including export sales from Thailand, in the nine months of 2022 stands at $5.9 billion, or 45 per cent of the total revenue from sales, equivalent to the same period last year.

For SCG’s operation in ASEAN (ex-Thailand), the revenue from sales in Q3/2022 recorded a 12 per cent increase on-year, amounting to $1.1 billion – 28 per cent of SCG’s total revenue from sales. This includes sales from both local operations in each ASEAN market and imports from the Thai operations.

As of September 30, SCG's total assets amounted to $25.4 billion, while its total assets in ASEAN (ex-Thailand) were $11.7 billion, 46 per cent of SCG’s total consolidated assets.

The company reported Q3/2022 revenue from sales of $433 million, up 18 per cent on-year, mainly from export sales from Thailand to Vietnam.

Roongrote said, "This crisis is incredibly challenging, but we are confident that SCG will overcome it and emerge stronger than ever thanks to our strategies, which include making timely adjustments to business plans, reducing costs, delaying non-urgent investment projects, and adjusting production plans to meet market demands. Meanwhile, we also invest more in new businesses with high potential – New S-Curve. For SCGP, its investment portfolio companies continue to expand healthily."

"SCG's financial position and cash flow remain robust due to the lower investment burden as the LSP project is now 97 per cent completed. Through constant communication with employees, suppliers, partners, and customers, we have excellent collaboration to get through this crisis," Roongrote stressed.

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