SCC: Glued by Its Own Cement?

What happened the other day was something not to be remembered in the history of The Siam Cement Public Company Limited (SCC) due to the fact that its share price plunged 6% in a week, 15% in 30 days period, and 18% in three months.

Moreover, the share price that fell to ฿372.00/share was the lowest in eight years and four months. SCC used to be the share that traded between 450-500 baht per share.

What happens to SCC lately?

 

The main factor that could cause the mighty SCC to fall to this state would be the announcement of its 3Q19 financial statement, expecting to be released on October 28, 2019.

Some has anticipated that SCC would report its profit at 6,000-7,500 million baht, declined 25-30% YoY. What’s worse is that its 4Q19 financial statement has been expected to decline as well.

The cause for this plummet is none other than the petrochemical business that used to be SCC’s main profit driver turned out to be the one dragging its profit instead. The petrochemical business of SCC is expected to yield lower profit around 50-60% at 3,000 million baht.

HDPE spread declined more than 30%, even though PP and PVC spread edged higher.

 

As for cement and construction materials business, SCC’s original business, has a tendency to slow down in making profit by 5-6% to book around 1,800-1,900 million baht of profit. Meanwhile, packaging business might be able to save SCC’s face by having an increase of profit by 12-13% to book at 1,900-2,000 million baht.

Lastly, the construction materials business in overseas such as Myanmar, Cambodia or Vietnam may not go well as SCC had anticipated when its major competitive like China had started to penetrate the market by establishing cement factories in Northern Myanmar and Cambodia.

 

Right now, SCC seems to be glued on its cement and will need more time to dig itself out of the cement.

That should take a while, but the problem is about whether its share price will continue to decline or not.