SCG Unveils its Operating Results and Robust Strategies Amid Q3/2023 Economic Headwinds

Innovative cost-efficient initiatives and sustainable technologies propel SCG forward.

SCG shared the company’s Q3/2023 operating results and strategies to counter regional economic stagnation. Despite facing a slowdown in the petrochemical sector, shrinking exports, and elevated interest rates, SCG is optimistic about its sustainable long-term growth while its financial stability remains robust.

Roongrote Rangsiyopash, President & CEO of SCG, revealed that SCG’s Q3/2023 operating results experienced a slowdown compared to the same period last year, declining from the first half of the year. This is due to the slow economic revival in the region, resulting in revenues of 200,237 million PHP (US$ 3,572 Million), a decrease of 12% from the same period last year. The reduced sales across all business units, petrochemical trough in the chemicals business and the ongoing economic uncertainties were considered the key factors.  Meanwhile, Profit for the Period was 3,890 million PHP (US$ 69 Million), and Operating Profit was 4,811 million PHP (US$ 86 Million), a notable 26% increase from the same period last year, with a strong cash reserve of 158,974 million PHP (US$ 2,836 Million). The result was that SCG has continuously adjusted its business strategy and has operated with caution and prudence, thereby maintaining financial stability.

“For Q4, the ASEAN economy is expected to improve, especially in Indonesia, which will see increased investment and consumption due to the construction of the new capital “Nusantara”. Meanwhile, the Thai economy is projected to recover, driven by the real estate and tourism sectors, benefiting from an increase in tourists. Furthermore, electricity costs and diesel prices might adjust downward, leading to better control over energy costs.” Rangsiyopash said.

Strategic Initiatives to ensure business continuity

In response to economic challenges including high inflation, ongoing turmoil in the Middle East, conflict between Russia and Ukraine among others, Thammasak Sethaudom, Executive Vice President of SCG outlined the company’s commitment to environmental sustainability where SCG is continuously implementing three strategic initiatives to ensure business continuity.

1. Streamlining energy costs: SCGis increasing the proportion of clean energy in place of volatile-priced fossil fuels. Currently, solar energy is employed at 220 megawatts, and bioenergy in cement plants in Thailand accounts for 40%. SCG is accelerating its efforts to find other clean energy sources such as planting Napier grass, a high-energy plant.

2. Reassessing business plans and high-growth investments:  SCG is prioritizing investments in high-growth sector including joint venture with Denka in the electric vehicle battery industry, and a joint venture with Braskem in the bioplastic industry.  The Long Son Petrochemicals (LSP), currently under construction and preparing for machinery testing, aims to produce polymers for the global market.

3. Pushing for green innovation to the global market:  SCG is accelerating its efforts for green innovation with products like SCG Green Choice with sales in the last 9 months of the year accounting for 54% of total product sales. SCG aims for it to constitute two-thirds of total sales by 2030. Meanwhile, SCG Cleanergy has provided a smart grid system to the Centara group, developing it into a Smart Hotel. SCG is also speeding up low carbon cement exports and promoting other green innovations such as green polymers and the recycling business.

Business Highlights Across Divisions

SCG Chemicals Public Company Limited (SCGC) sales are on the rise with an increasing sales volume.  SCG is accelerating its shift towards a holistic green polymer business, from upstream to downstream operations. Currently, SCGC GREEN POLYMER^TM boasts a sales volume of 170,000 tons, in line with its production target of 1 million tons by 2030.

Recently, SCG established the Braskem Siam Company Limited, a joint venture with Brazil’s Braskem.  It is currently in the development and detailed project study phase, aiming for a final investment decision to establish a plant in the Map Ta Phut Industrial Estate, Rayong.  This facility will produce raw materials for bioplastic resins (Green-PE) with a production capacity of 200,000 tons per year.

SCG Cement-Building Materials Business highlighted that green construction and living solutions are continuously growing. Low carbon cement is rapidly gaining popularity, recording a 69% usage in Thailand.  As a result, SCG has expedited its production adjustments and expanded exports.

As for the progress of SCG Decor, the Securities and Exchange Commission (SEC) has approved the securities offering and filing request, preparing to launch an IPO of not exceeding 439.1 million shares, aiming to seize the opportunity to lead the ASEAN business in surface decoration and holistic sanitary wares.

SCG Packaging Public Company Limited (SCGP) on the other hand, emphasized the increasing sales of packaging in the growing food and consumer goods sectors. In line with SCG’s strategy to invest in high-potential businesses, recent investments include Law Print & Packaging Management Limited, a prominent packaging solution provider in the UK, a leader in packaging solutions, especially in the pet food industry. This will strengthen SCGP’s sales channels for flexible packaging globally.

Additionally, SCG invested in Bicappa Lab S.r.L., a renowned manufacturer of medical supplies and labware in Italy and a major player in Europe, to tap into the “pipette tips” market and access technological expertise. This expansion not only broadens SCGP’s customer base but also supports the growth of the medical supplies sector in ASEAN.

Furthermore, SCGP integrated Artificial Intelligence (AI) technology to enhance the efficiency of packaging paper production and energy management and to increase the use of alternative energy to reduce greenhouse gas emissions by 15% in 2023.

SCG’s unreviewed operating results for Q3/2023

SCG registered Revenue from Sales of 200,237 million PHP (US$ 3,572 Million),down 12% y-o-y due to a reduction in sales across all business units and the exclusion of the deconsolidation of SCG Logistics. Meanwhile, Profit for the Period was 2,441 MB, closely similar to the same period of the previous year. Operating Profit stood at 4,811 million PHP (US$ 86 Million), reflecting an increase of 26% y-o-y.

Compared to the last quarter, Profit for the Period decreased by 70% due to the previous quarter having gain from fair value adjustment of investments and dividend income. Additionally, this quarter experienced a loss item related to regional cement asset impairment. When excluding the regional cement asset impairment, operating profit decreased by 42% q-o-q.

In the last 9 months of 2023, SCG reported Revenue from Sales of 610,023 million PHP (US$ 10,973 Million), marking a decline of 15% y-o-y. This decrease was primarily attributed to the reduced sales across all business units due to the market situation in the region. Profit for the period totaled 43,106 million PHP (US$ 769 Million), an increase of 27% y-o-y. Operating profit amounted to 20,406 million PHP (US$ 364 Million), representing a drop of 40% y-o-y. This decline was predominantly driven by the petrochemical trough and a weakening ASEAN market. SCG’s Revenue from Sales of High-Value Added Products & Services (HVA) reached 205,776 million PHP (US$ 3,671 Million), making up 34% of the total Revenue from Sales. Revenue from Sales of green products, or SCG Green Choice, totaled 328,363 million PHP (US$ 5,858 Million), constituting 54% of the total Revenue from Sales.

In addition, SCG’s Revenue from operations outside of Thailand, including export sales from Thailand in 9 months of 2023 registered 163,505 MB 206,566 million PHP (US$ 4,649 Million), or 43% of total Revenue from Sales.

For SCG’s operation in ASEAN (ex-Thailand), the Revenue from Sales in 9M/2023 recorded a 28% decrease y-o-y, amounting to US$ 2,612 Million. 145,226 million PHP (US$ 2,612 Million). This decline can be attributed to factors such as reduced export activities and lower business performances across strategic markets within the region. This contributed to 24% of SCG’s total Revenue from Sales. This includes sales from both local operations in each ASEAN market and imports from Thai operations.

As of September 30, 2023, SCG’s total assets amounted to 1,487,309 million PHP (US$ 26,277 Million). Of these, the total assets of SCG in ASEAN (ex-Thailand) were 673,984 million PHP (US$ 11,908 million),or 45%of SCG’s total consolidated assets.

The company reported 9M/2023 Revenue from Sales at 10,345 million PHP (US$ 186 Million), a 32% decreased y-o-y mainly from lower sales in Packaging business and decreased exports from Thailand.

In the Philippines, SCG Marketing partnered with the United Architects of the Philippines (UAP) and key industry influencers. With UAP, SCG introduced a smart pointing system to reward purchase loyalty. SCG also sponsored the UAP Reimagined Project, leading to significant redesigning of the UAP building. Furthermore, collaboration with influencer Engr. Ronald Tolentino effectively showcased products such as the SCG Smartboard and SCG Smartwood.

Mariwasa’s commitment to ESG shone through partnerships with GMA Kapuso, a socio-civic organization to facilitate social programs and outreach to the public, and the FairBuilding Network, a free online platform that helps non-profit organizations with building projects and social housing developers. Notable projects included constructing three schools in Quezon Province and donating tiles for shelters.

In further ESG efforts, SCG has granted 340 scholarships, underscoring their commitment to reducing inequality in line with ESG 4 Plus.SCG prioritizes business growth alongside environmental stewardship in line with the ESG 4 Plus strategy.