Home Ed. 2019 August SCG announces operating results for Q2 and H1/2019, promotes HVA and circular...

SCG announces operating results for Q2 and H1/2019, promotes HVA and circular economy

SCG has announced its operating results for Q2 2019 and H1 2019, which are characterized by shrinking profits resulting from trade war tensions. The company underscores its goal to develop innovative and high value added (HVA) products and services, and achieve a circular economy complemented with delivering total solutions for customers and accelerating major investment projects. SCG is taking a series of measures to ensure long-term growth and maintain stability.

Mr. Roongrote Rangsiyopa-sh, president and CEO of SCG, disclosed the company’s unre-viewed operating results for Q2 2019, which registers a revenue from sales of PHP179,431 million (US$3,453 million), a 9 percent y-o-y decrease mainly from lower chemicals product prices and a 3 percent q-o-q drop due to decreases in all core businesses. Profit for the period, without the severance pay adjustment, fell to PHP14,933 million (US$287 million), down 27 percent y-o-y and 22 percent q-o-q in light of the trade war concerns that affected the chemicals margin and inventory loss of PHP1,891 million (US$ 36 million). Factoring in the severance pay adjustment of PHP3,347 million (US$2,035 million), SCG’s profit for the period stands at PHP11,586 million (US$223 million).

SCG’s revenue from sales for the first half of 2019 dropped by 7 percent y-o-y to PHP366,192 million (US$7,005 million), predominantly due to lower chemicals prices. Profit for the period, without the severance pay adjustment, dipped 16 percent y-o-y to PHP34,294 million (USD656 million), owing to the drop in chemicals margins on global trade war concerns. However, the CementBuilding Materials Business re-corded higher revenues, thanks to the regional construction sector recovery. Factoring in the severance pay adjustment, SCG’s profit for the period stands at PHP30,929 million (US$592 million).

SCG’s revenue from sales of HVA products and services for Q2 2019 reached PHP77,572 million (US$1,493 million) or 43 percent of total revenue from sales, representing an increase of 4 percent y-o-y and 4 percent q-o-q. As a result, the revenue from sales of HVA products for the first half of 2019 amounted to PHP153,155 million (US$2,930 million) or 42 percent of total revenue from sales, increasing 2 percent y-o-y.

SCG in ASEAN (excluding Thailand)

For SCG’s operations in ASE-AN (excluding Thailand), revenue from sales in Q2 2019 re-corded a 7 percent decrease y-o-y at PHP46,077 million (US$887 million), which is 25 percent 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 30 June 2019, SCG’s total assets amounted to PHP1,028,758 billion (US$20,125 million), while the total assets of SCG in ASEAN (excluding Thailand) amounted to PHP344,507 million (US$6,739 million), which is 33 percent of SCG’s total consolidated assets.

SCG in the Philippines

Based on the Q2 2019 report, SCG in the Philippines owned PHP13,020 million (US$ 255 million) worth of total assets. The company reported a Q2 2019 revenue from sales of PHP4,150 million (US$80 million), representing a 6 percent y-o-y decrease. This includes sales from both operations in the country and imports from the Thai operations. For the period of H1 2019, SCG’s Phil-ippine market reported a revenue from sales of PHP8,583 million (US$164 million), which is a 6 percent y-o-y decrease due to the Packaging Business.

SCG continues its commitment to making education more accessible to Filipinos through its Sharing the Dream scholarship program. In the program’s 12 years, SCG has granted 300 high school and 20 college scholarships, supporting more than 2,000 deserving Filipino students achieve their goal of having a better future.

Mr. Roongrote said, “Despite a series of hurdles ranging from the trade war, global economic slowdown, severance pay adjustment in Q2 2019 and inventory loss affecting SCG’s operating performance for the second quarter and first half of 2019, especially in the chemicals business, SCG continues to broaden its range of innovative and HVA products and services. It strives to integrate the circular economy concept into its operations while delivering holistic solutions for customers. The company is also steering major investment projects with the aim of helping generate business values to meet planned goals. With the implementation of these two key strategies, SCG will be able to strengthen resilience against global economic fluctuations through a management approach that focuses on long-term growth and stability.”

To pursue the strategy of Long-term Growth Management, the Chemicals Business put a spotlight on increasing its competitive advantage by leveraging SCG’s strength on HVA product and service development, especially Sustainable Chemicals products and services that are capable of achieving a circular economy. Examples include the development of special-grade polyethylene compounds with SMX Technology™ for converters and brand owners who look for higher-quality plastic resins with reduced material consumption yet still have mechanical properties, and the development of Specialty Additives for fully recyclable packaging. SCG recently launched SCG Advanced Materials Laboratory, an R&D center in Oxford, United Kingdom, with a mission to develop prototypes of Functional Materials.

The company’s Cement-Building Materials Business demonstrated robust growth, thanks to continuous investment in Thailand’s government construction projects along with the positive economic output of all countries in the region except Indonesia, which is facing a weakening domestic demand. SCG actively focuses on tapping potential and fast-growing markets such as the retail business. The Logistics Business has also expanded temperature-controlled warehouse capacity. SCG has delivered total solutions for custom-ers such as a roofing solution that saves energy and prevents leaks with improved color durability to deliver greater comfort.

The Packaging Business showed outstanding growth with good scalability potential in line with the domestic and regional economic growth, particularly in ASEAN. The e-commerce boom and growth in the fast food industry also contribute to this growth. SCG focuses on accelerating business growth by expanding production capacity in the Philippines’s UPPC factory and Vietnam’s BA-TICO factory on top of acquiring shares of Fajar, a major Indonesian packaging paper manufacturer.

To ensure Stability, SCG stress-es proper liquidity management by maintaining an appropriate-level working capital. By the end of the second quarter of 2019, SCG had cash and cash under management totaling PHP70,802 million (US$1,385 million) in line with the investment plans and uncertain business environment. This includes reviewing investment projects where SCG focuses on projects that can rapidly generate values. Examples include the acquisition of Fajar shares, in which the operating performance will be combined with SCG’s Packaging Business in the third quarter of 2019. The ongoing investment projects such as Vietnam Long Son Petrochemical (LSP) are pulled ahead to meet the planned schedule.

The company has increased energy efficiency by promoting a series of renewable energy usage in the plants. Initiatives include onsite solar panel installation, which can generate 77mW of electricity, reduce the use of external sources and save approximately PHP570 million (USD$11 million) per year. Another scheme is the waste-to-energy approach such as power generation from waste in paper manufacturing. The measure can produce 9.6mW of electricity. SCG has also sought enhancements in manufacturing effectiveness and cost reduction initiatives and embraced collaborations to develop digital technologies. SCG has encouraged in-house start-ups and forged more collaborations to develop deep technologies to streamline the operations of all core SCG business units.

SCG also underlines increasing export opportunities following the global market boom. Examples include Packaging Business exporting to China and ASEAN countries, Cement-Building Materials Business exporting ceilings and walls to South Korea, and a plan to expand to Europe in the near future.