SCC: From Terrible to Worse?

The recent report of The Siam Cement Public Company Limited (SCC)’s 3Q19 profit has answered all questions regarding the plummet of SCC’s share price as of late that broke through all support levels.

Booking 6,200 million baht of profit in the third quarter, SCC’s profit has declined by 35% YoY and 12% QoQ. The number indicates that SCC did not perform better, but worse.

 

When looking deeper into SCC’s three main businesses in the financial statement, the word “decline” is evident.

SCC’s cement business and construction material made 45,317 million baht in revenue, decreased 2% while the net profit was 888 million baht, increased 235%. It might look skyrocket, but in reality, the gross profit margin was only 2%.

Petrochemical is SCC’s leading business but faced a decline of 24% to record revenue at 44,048 million baht while the net profit from the business decreased by 57% to book 3,247 million baht of profit. The net profit in petrochemical businesses declined twice as much as the revenue, which showed a significant decline in profit in the petrochemical business.

Lastly, the packaging business might be the only handsome one out of the three with a revenue of 24,445 million baht, increased 10%, but its profit sank by 11% to record at 1,527 million baht.

 

Is it possible to assume that the reason for a “higher revenue but lower profit” might due to the cost management of the company or could there be any extraordinary cost hiding in the statement?

 

Putting the assumption aside and judging by the number shown in the statement, the report in 2Q19 was what investors thought terrible, the 3Q19 report was even worse! Now, the question is how will the 4Q19 report look like?

As of now, the direction of the petrochemical business is on a rocky path without any sign of reaching a smoother surface. Maybe, the 4Q19 statement could be even .….worse?