ASEAN: Siam Cement hot on Indonesia & Vietnam (with Forbes)

  • By Pooky, Thai Intel’s economics journalist

Fundamentally, as a mostly neutral observer of Thailand, but also a Red Shirts, Thai Intel welcomes check and balance on the Yingluck government.

Since Abhisit‘s Democrat Party is the opposition, clearly, this is an important part of Thai politics. But by Thai Intel’s analysis, the Democrat Party is failing at this checks and balance duty-because it is opposing like 100% of what Yingluck is doing, like all the time-and that just de-legitimize their opposition, as just playing politics.

But a no confidence censure debate against Yingluck, perhaps, is right around the corner. Abhisit’s Democrat Party, have always focused their opposition, on “Character Assassination.”

But it was different with the Pheu Thai Party.

It was a tough choice for the Pheu Thai Party, when Abhisit’s Democrat Party, was in power-concerning the no-confidence centure debate, against Abhisit’s government.

The choice for the Pheu Thai Party, was either censure on the normal Thai political thing to do, of corruption and character assassination, or would the censure be on, policy failures by the Democrat Party.

The final decision, was mixture, but the strong does was on management failure.

So The Pheu Thai Party, in that no confidence debate, in the opening remarks, raised the issue of Indonesia and Vietnam, that Pheu Thai Party says were rapidly rising in ASEAN-and then the Pheu Thai Party, pointed to several global ranking index, that sees Thailand under Abhisit as doing very poorly like ranking by the World Economic Forum (WEF) and the corruption index.

If anyone cares to remember back, in parliament, Abhisit’s Finance Minister, Korn, in responding, said Vietnam was verging on a collapse and is not a serious competitor of Thailand, then on Indonesia, it was some Indonesian problems. And on WEF is was something like WEF does not understand Thailand and on corruption, the Democrat Party asked for receipts for proof.

  • The Following is from Forbes

Thailand’s Siam Cement Eyes Indonesia, Vietnam For Growth

Thailand’s Siam Cement Group (SCG) is stepping up the pace of its regional expansion, with new deals coming thick and fast. The country’s largest industrial conglomerate, it produces cement, paper, chemicals and other materials. Now it seems intent on building out its Southeast Asian operations, notably in Vietnam and Indonesia. After meeting Tuesday with Indonesia’s President Susilo Bambang Yudhoyono, CEO Kan Trakulhoon said SCG and its local partner would build a $300 million cement factory in West Java. This would be followed by a further $700 million in new investments in Indonesia, Kan told reporters in Jakarta, without specifying target industries. Last year SCG agreed to acquire 30% of Chandra Asri Petrochemical, Indonesia’s largest petrochemical firm whose pre-1997 debt-fueled expansion was followed by years of painful restructuring. SCG’s entry into Chandra Asri is another sign that Indonesia is back on the map for downstream producers, even though domestic oil output has stagnated. Chandra Asri is a useful vehicle for SCG to expand in Indonesia, where it’s operated since the 1990s.

A more ambitious project looms in Vietnam, where SCG has taken a 46% share in a $4.5 billion petrochemical facility to be built on a southern island. The project, which was put on hold in 2009, is backed by two Vietnamese state companies (Petrovietnam, Vinachem) and Qatar Petroleum International, which will supply feedstock.  Commercial operations are due to start in four years. Along with Indonesia, Vietnam is attractive for producers seeking low-wage alternatives to China along its southern flank. The planned facility will supply 1.4m tons of olefins for domestic industry. Vietnamese companies have weathered a few rocky years after the economy began to overheat in 2007 and soaring stocks went into reverse. A global downturn only added to the pain for exporters. Vietnam seems to be on better footing now: its central bank said Tuesday it would cut interest rates by 1%, after a long period of tightening, to the relief of businesses seeking credit. Still, some investors remain wary of Vietnam’s volatile markets and the undertow of its inefficient state-owned industries. However, SGC has little choice but to team up with state oil and chemical companies if it wants a piece of the action in Vietnam.

The question for investors is what kind of returns SGC can expect from its capital-intensive Southeast Asian expansion (it’s also investing in the Philippines and eyeing Myanmar). It still has to spell out how it plans to fund the Vietnam plant. Overall margins have been hit by weakness in its chemicals division, a major contributor to revenues. Last year’s massive flooding in central Thailand meant a sharp fall in 4Q revenues across the group. Lower profitability is one reason why Fitch Ratings recently revised its rating on SCG’s local-currency debt to stable, from positive, and said that an upgrade was unlikely.

The Outlook revision reflects weaker-than-expected profitability driven mainly by weak chemical product-to-feed margins. The difficult operating environment for chemicals is likely to depress SCC’s EBITDA margin and delay deleveraging in 2012-2013. As a result the prospect for rating upgrade over the next 12-18 months has decreased.

SCC’s ratings are supported by its well-diversified revenue sources in the chemical, cement, paper and building material businesses. Its leading position in the domestic cement and paper businesses should support SCC’s cash flow generation as the operating environment for chemicals remains difficult in 2012. Product diversification within the chemical division also helps alleviate risk from demand contraction in any particular chemical chain.

Fitch expects SCC’s EBITDA margin to drop further in 2012 due to likely weakening of chemical product margins. The healthier profitability of cement, paper and building material businesses should help it maintain EBITDA margin in high-single-digits in 2012. SCC’s EBITDA margin should gradually improve alongside an upturn of the chemicals industry in 2013.

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