BANGKOK -- Thailand's industrial conglomerate Siam Cement Group has revised down its sales growth outlook for 2017 to 3-5% from 5-10% following an unexpected drop in cement demand in the first half of the year.
The group's net profit in the April-June period came in at 13.252 billion baht ($396 million), down 17% on the year, on sales of 108.825 billion baht that were unchanged from a year earlier.
"The cement market in Thailand slowed down more than we expected," Chief Executive Roongrote Rangsiyopash told reporters in Bangkok on Wednesday. Net profits in cement and building materials, one of its three core business units, slid 29% year-on-year.
Roongrote said that government infrastructure projects, which are being increasingly approved and going through bidding procedures, had not yet reached the stage of procuring cement.
Domestic cement sales by volume were down 7% on the year in the April-June period, following a 7% fall the previous quarter. Demand in all sectors -- government, commercial and residential -- declined.
"I hope that the latter half of the year will improve, but I am not sure that we can make up for the decline in the first half," Roongrote said.
Adding to the slow domestic market, other Association of Southeast Asian Nations markets also saw sluggish cement demand though Roongrote shrugged off concerns, saying these had been caused by temporary factors.
For example, in the first half of the year, Vietnam logged flat growth in cement demand partly due to bad weather slowing down construction projects. The Indonesian market, which saw negative growth, was affected by the Muslim holy month of Ramadan season falling in June, a month earlier than last year.
It was also a slow quarter for SCG's chemicals business, which suffered a net profit decline of 18% year-on-year. This was largely due to the price of naphtha which, in line with oil prices, were expected to pick up this year, Roongrote said. "At the start of the year, we thought prices would increase but now they are falling again," he said.
Earlier this month, the group approved investments in a petrochemical complex in southern Vietnam. In a joint venture with state-owned Vietnam Oil and Gas Group, SCG will invest $5.4 billion for a 71% stake in the project.
Commercial operation of what will be Vietnam's first petrochemical complex is slated to start in 2022. It will have olefin production capacity of 1.6 million tons per year. Olefin is a family of hydrocarbons that includes ethylene. "This will support Vietnam's continuously growing demand," Roongrote said.