The Siam Cement Public Company Limited (TCM1.F) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to SCG Analyst Conference for the Fourth Quarter of 2025. I'm [ Harini ] from the Investor Relations team, and I will be your moderator for today's session. We are pleased to welcome all the guests who join our session for both on site and online. For those who joined online, kindly change your register name to be your name underscore your company so that we are able to recognize. Today, our management are here to provide you the fourth quarter results and important business updates and outlook. [Operator Instructions]. Today's presenters comprise of SCG management led by Khun Thammasak, the CEO of SCG, who will walk you through consolidated results and provide highlights of the SCG Cleanergy. And we have Khun Sakchai, the CEO of SCG Chemicals. Next, we have Khun Surachai, President of SCG Cement and Green Solutions; and Khun Wiroat, President of SCG Smart Living and SCG Distribution and Retail, and we will also be presenting SCG Decor; followed by Khun Chantanida, CFO of SCG, who will present the financial parts and also SCGP. And we have Khun Wachirachai, Chief Sustainability Officer, who will present the sustainability highlights. And now let's start for today's presentation, beginning with Khun Thammasak.

Good morning and again, this is the first analyst call conference of the year. And this year is very interesting year, which we will discuss on what is going on and what is the implication to SCG business strategy. But before we get into that outlook and our plan for this year, let's step back a little bit to 2025. I have to say 2025, it's one of a very interesting year. So somebody said to me that 2025 is a year of the beginning of the world order breaking down, which is probably true. We will see a changing in the world order in the very rapid scale. So anyway, if you look at the global events, the global trade and environment are still very, very volatile. If you remember, the first half of 2025 is see a lot of front-loading. You see that the GDP growth is still quite okay, but it's come from the front loading and also the deflation as cheap price -- product price from China flooding into Southeast Asia. So you see that the price complex and the slowdown in -- especially in Q4 of this year. Overall GDP, if you look at it, it still stay at 3.2% compared to 3.3%, which looks like it's still okay. But if you look in detail, you're going to see a drastic change from quarter-to-quarter. Geopolitical tension still very volatile and even more volatile this year. That's why you see the energy price fluctuate drastically. Chemical business still in trough cycle. If you look at the spread of the key product, HDPE-Naphtha and PP-Naphtha, you could see that it's weakened over the years. So this is something we are facing on the global setup of last year. On the domestic, the Thai baht appreciate 2.4 baht per U.S. dollar on a year-on-year basis. And this is quite significant for the dollar surplus business. And the sluggish, the Thai economy, Thai GDP growth stand only to 2.2% compared to 2.5% a year earlier. That is the situation we are facing. But if you look at our result, I have to say on the cash flow, which is something we are focused over the past few years already. We ensure that we're going to have a strong cash flow position. I would like to emphasize on the adjusted EBITDA generation with this THB 55 billion. Why? Why is that? Because this is the EBITDA that generates from the normal business before we take the decision on the restructuring. So restructuring is something that we are mindfully execute to make us stronger. So that's why I would like to present this. And this THB 55 billion is something that's better on a year-on-year basis. Earnings, if you adjust before the restructuring cost, we stand at close to THB 5 billion. Of course, in the Q4, with the slowdown of the economy and also the chemical cycle is still touched on a very complex gap as well as the turnaround season for our cement plant. So that's why you see a slightly negative on the earnings in Q4. Anyway, on the full year basis, our net debt still declined. So this is the homework that we have to submit to you that this is a restructuring that we try to do. We want to make our balance sheet stronger. So we reduced net debt year-on-year. This is the second year that we are reducing our net debt. Net debt-to-EBITDA stands at 5.5x. If you remember, at the peak, it's 6.3. So now we are moving down, even though the business context is still very, very tough. We still continue to lean our working capital further. So if you remember last time, we are talking about 30 billion, now we lean another 10 billion. So this is something we are working tirelessly to make sure that our end-to-end supply chain are lean, but not just lean. As you know, at the moment, the lean supply chain probably less important than resilient supply chain. So that's why we are mindful to manage this kind of the lean supply chain. Our cash on hand is still pretty strong, THB 52 billion. And CapEx, we have tightened our capital expenditure. We target at the beginning of the year around THB 35 billion to THB 40 billion. You could see that we use only THB 30 billion. So this is something we are very mindful on this one. So dividend from our investment sector still pretty strong. You could see that registered THB 16 billion against 2024 of THB 14 billion. So that's a pretty strong cash flow generation from our investment. Divestment, this is another homework I promised over the years. I have to say that still on track, okay, still on track. We're still moving steadily to achieve our milestone, and we will come back to you to report this later on, okay? So as we have a very strong dividend and we have a strong EBITDA generation adjusted before the restructurings, so that's why we are very confident to take care of the shareholder on the dividend THB 5 per share. So the interim dividend is THB 2.5 that we already paid and the total dividend will be THB 5. And the payout ratio is 43% based on the reported net profit of THB 14 billion. Now let's touch a little bit on the restructuring because 2025 is the year that we stop loss of many, many businesses to make sure that we are healthier into the future. So we mindfully take the restructuring expense amount to THB 5.3 billion, which is significant. But it will yield a recurring saving for us THB 4.3 billion. So that is something that if everything else are equal, this year, we are stronger on the THB 4.3 billion recurring saving. So that's why we have to do it. Of course, it's a very difficult decision, for example, that we are fighting over the past few years, and we have a really key talent people are working on this online platform. So very well accepted by the consumer and seller. However, if you really want to sustain this platform into a regional or global platform, it still require a lot of cash to be burned. So that's why we carefully make a decision on this. And again, we made a decision that we stopped this one and then the impact to our bottom line on THB 1.8 billion. But the recurring loss that the platform generate on our portion only, which is 50% is around THB 500 million. So this is something we are taking action on this. Another thing that you see in the Q4 that we try to do is we decide to streamline our distribution and retail model in Thailand. So instead of using the centralized management from Bangkok to push the product and the category into the outlet, we think it's wrong. We have to change to a pool channel where our outlet, the localized outlet can call the products and the inventory from the center. So this is -- in the past, there was a mismatch in the inventory pushing from the center to the local. So this is something that we have to change, and we have to create a very resilient and adaptive our channel. That's why we have to take this adjustment. And again, Khun will explain more in detail on our strategies. So to really clean up and make it into a very localized and pool channel, we take the expense on THB 1.359 billion. That's mainly on the inventory and associated to those impairment. It will create a future saving on the THB 400 million per year, okay? And we still commit on the HVA and the Smart Value product, which is our main product strategies to cope with the current situation. So that is the highlight I would like to emphasize. If you move into the financial result, the sales revenue in the Q4 is THB 126 billion and dropped 3% year-on-year. As I said, Q4 is a tough quarter for overall business. And in full year, our sales decreased 3% also. We registered at THB 496 billion. Even though we target to have more sales revenue at the beginning of 2025, but if you look at the volume actually increased, tonnage increased. However, the price decreased. So this is translated into a lower sales by 3% year-on-year. So -- and if you look at the destination, something I would like to point out is ASEAN is still vibrant area of growth. So we increased the sale to ASEAN by 2% year-on-year. So you see that -- the shift in the market mix. U.S. still remained at 1%. So we were not -- those who still buy from us do buy from us. So that is -- even though there's a lot of turmoil on the tariff, but our products still have some uniqueness that still can sell. And next one is on the revenue by segment. You could see that Chemicals still represent 42%, Packaging 25% and remaining is Cement and Building Materials. So you could see all segments sales dropped year-on-year, except the Cement and Green Solutions. If you look at EBITDA, EBITDA is a little bit messy, but I just want to point out that if you look at the red figure, THB 55 billion adjusted EBITDA, this is before we take restructuring cost. And compared to 2024, also adjusted EBITDA because we have to take the interest rate swap gain with this onetime out. So you could see that the core recurring EBITDA has increased healthily 6% amid a lot of depressed situation, mainly because we take the restructuring. When you cut loss, you stop loss, you become stronger. So this is something that we are mindful of doing and we come -- I think we move to the right direction because our core EBITDA generation has been healthier on the year-on-year basis. So -- and then on the profit, you could see that the profit -- registered profit on the year-on-year is THB 14 billion. Of course, the big chunk has come from the association of the Chandra Asri, which are noncash yet, but we are endeavored to working to finish -- to complete this deal. So later on, when the deal make progress, we can discuss in more detail. But in general, our adjusted earnings, it's about close to THB 5 billion. And compared to this year is the -- last year is THB 5.9 billion. But if you look at the context that we take the full year of the Long Son depreciation and interest. So this is -- that's why I will point out that please look at us at the EBITDA generation because the net profit will take this depreciation and interest hit to our bottom line. So that is the review of overall 2025. May I pass to [indiscernible].

[Foreign Language] Good morning. Let me start with the highlights of Chemicals last year. The margins, look at the PE margin is quite flat, but PP margin was deteriorated. Quickly look at the financial performance last year. Adjusted EBITDA grew by 23% year-on-year, attributed to efforts on efficiency enhancement and cost saving. And also LSP started up in August 2025 successfully with efficiency improvements. That is our highlights. I would like to move to the details. The olefin utilization rate last year, the industrial average is a little bit lower than SCG Chemicals or running. on average, we run about 85% up to 90%. Look at the spread, I just mentioned on the HDPE. Actually, last year is the year of the massive capacity from China coming on stream, both C2 and C3, but you look at the gap of the last year compared with 2024, it seems flat. We always believe the industrial gap not lower than this because of ethyl. If the gap is lower than this, you will see the more capacity shut down. And last year also, several capacities also announced almost every month later, I will show you. But PP gap is a bit lower. Actually, the first 3 quarters in line with the PE gap. Only last quarter because of the really high competition of the propane market, U.S. and Saudi Arabia try to compete in the market share in Asia. That's why propane price at the fourth quarter dropped down sharply. That make the PDH in China can utilize capacity more that make the PP supply flooding make the PP price in the market down. That's why PP-Naphtha gap is lowest at USD 250. Average the whole year's PP-Naphtha is about USD 309. PVC chain improved a little bit from the last year because of the ethylene prices now, PVC chain gap is improved to the USD 324. Oil price is lower than the year before, USD 68 per barrel. New supply in short is, very high new capacity coming on stream. Demand situation is just moderate aligned with the GDP growth. This is the ethylene capacity. Last year, 2025, 14 million tonnes new capacity. Anyway, also have the capacity that some mothball, some shut down or even postponed turnaround. All in all, it's about 5 million tonnes and net new capacity about 9 million tonnes. But also the demand globally has also increased about 7 million tonnes. So actually, last year, the oversupply a little bit more. But look at this year, ethylene capacity is much less than the last year. And also announced capacity that will be added into the shutdown capacity, another 5 million tonnes. And net new capacity this year is lower than the last year. It's about 4 million tonnes. On top, if you look at the demand side, as I mentioned, 7 million or 8 million tonnes, it seems this year market is a little bit tighter than the last year, but iron ore is still oversupply. Look at the sales volume the last year and SCG Chemicals after we start starting up LSP, we have another 300,000 tonnes in the last quarter. That's why last year, total sales volume is over 2 million tonnes. Look at value chain is the same. The gap is better and also even though the last quarter, we have the VCM1 shutdown, the operation in the last quarter less than the quarter 3. But overall the year -- overall year's total sales is higher than last year, up to 330,000 tonnes. Financials. EBITDA look at adjusted EBITDA, excluding LSP and all onetimes. You see the EBITDA, mainly the operation in Thailand and the existing operation in Southeast Asia. Adjusted EBITDA, we achieved THB 11.6 million. And even though we reported EBITDA is about THB 4.1 billion. Look at profit. Profit also in line with EBITDA. Adjusted profit is higher than the last year. The profit adjusted is about THB 1.2 billion. Anyway, we reported net profit, that's including onetime. Some item is positive, some item negative. But all in all, reported net profit is THB 1.46 billion. What we have done, our cost strategies last year. The first one, as I already mentioned in the beginning of the last year, we have to control costs and also improve the efficiency. We achieved about THB 1.8 billion of cost saving from the operations. And also the second strategy is very important during the very high competitions, the optimization in the whole chain from the feedstock. The feedstock look at the last quarter's gas price dropped down. Our asset, we try to maximize using gas, especially LSP. LSP in the last quarter is quite advantage in comparison with the other naphtha pack because we can utilize gas up to over 80%. And also, we optimized the product portfolio and also try to allocate the products to the area that we can get higher netback. The third strategy is HVA. HVA, we have to try hard to maintain the HVA portion. Last year, we still achieved 60%. So it means some of the commodity. Some of the old HVA turn to be commodity. We have to add the new products, the new HVA. That's why we can maintain 60%. This contributes to the price and the margin. And also the discipline on the cash management. And we did well, especially the working capital. Last year, we also reduced the working capital significantly about THB 5 billion. And also one of the commitments tied to divest the asset that relatively less cash return. This is -- we are doing. Of course, we have the small unit in the mid of last year. That's a lease cycle in that's already closed out. And the divestment now we still try hard to deliver our commitment. LSP, we started in the second half of August last year. We're fully operating with approximately 90% land. And also, as I mentioned at the last quarter, we can utilize the gas over 80%. And the LSPE profit to receive ethane in the year 2028. That is on track, on budget and on schedule. And the plan now we already complete the 2 tank of the ethane completed in terms of the structures and also the rooftop. This is another just the small unit, but it's really great achievements. We try to develop so-called chemical recycle or advanced recycle. This is the world trend. In the beginning, we quite struggled to run this plant continuously. But the last year, we can achieve, run this unit over 4 months. So this means we can have the sizable recycled naphtha to feed into our crackers. This is also can serve the brand owner. This is -- this year, we will run more and we hope for the whole year, we will get more green naphtha and to support to the customer. This is the outlook. I think everyone would like to hear what happened and what's going on for the petrochemicals this year. Starting from the beginning of this year, some positive factors, what we have seen. Of course, the supply cut more from December last year and also the beginning of this year. Several new company or new cracker, several cracker they announced to cut the capacity more. For example, Formosa. Formosa, there are 3 crackers combined capacity about 2.1 million tonnes. Now they announced to mothball one line at 700,000 tonnes and also announced we shut down another line in the middle of this year. So it means about 2/3 of the capacity will be shut down. Apart from Formosa and also Exxon, you probably know last year. Exxon, they already announced to close down their cracker in Singapore the end of the first quarter of this year. And sale level activities in Korea is also -- they used to announce to cut the capacity in the whole country about 25%. But India, in fact, they cut the capacity more than 25%. This is the factors of the capacity cuts that will release the supply ample in the market. And also the news of the China stimulus package, this is also can be considered as the positive factors because especially the real estate, the construction sector in China, we hope that after the stimulus package will improve. And if the construction sector improved, that also favor to the polymer demand, especially PVC. And also the Chinese government also announced the regulations, especially PVC export, they used to rebate about 13%, but they announced to stop these subsidies from April 1. It means that the PVC producer in China will have to absorb the cost is higher. Immediately after this news released into the market, PVC price jumped about USD 40, USD 50 within a few days. And also, China is also trying to tax on the domestic naphtha. This is under consideration. This is also another good news for the other, but not the producer in China. Of course, the olefin chain naphtha price is still volatile. You look at the geopolitical -- every time the Iran, U.S. the news of the war skipping serious that also makes the energy price globally increased, including the naphtha price. In the beginning of this year, actually, naphtha price is quite soft. But after the situation of Iran, U.S. getting more serious, immediately, the crude oil price is higher and also naphtha price is higher. Anyway, if you look at the big pictures, supplies of the crude oil will be higher this year. Especially if the political tension relief Venezuela, Iran, hopefully, the longer term will be peaceful. That also contributes to the feedstock price. We really hope this situation will make the naphtha cracker is more competitive. Okay. That's all my part. I would like to pass to [indiscernible]. Thank you.

Good morning. I would like to start from the top 3 in 2025. In 2025, EBITDA grew by 25% year-on-year, driven by a clear focus on low-carbon cement products, cost saving and continuous improvement in our operation. And we also successfully launched low-carbon cement Generation 3 or we call them calc cement. This is the newest version of our low-carbon cement. That's fully aligned with our net zero road map and ready for the upcoming carbon tax in the near future. And the sales volume growth across ASEAN market, so we can capture this opportunity also. Move on to the market situation. For the Thai market, cement demand in the quarter 4 decreased by 2% year-on-year due to soft demand. You know that we have flooding in Central and Southern Thailand in the quarter 4. However, for the whole year, demand decreased by 2%, increased by 2% year-on-year, mainly from public projects. And the market in ASEAN also improved compared to the same period last year, particularly in Vietnam and Cambodia. Revenue from sale in the quarter 4, revenue declined slightly 3% Q-on-Q due to soft demand that I mentioned earlier. And however, for the whole year, sales revenue registered at THB 82.7 billion grew 1% year-on-year, mainly from price increasing. For the EBITDA in the quarter 4 registered at THB 3.2 billion. For the whole year, EBITDA registered at THB 14.4 billion, increased by 25%, mainly from sales revenue growth and cost reduction and selling price increasing. Move on to the profit. The profit for the period registered at THB 1.2 billion. For the whole year, registered at THB 5.8 billion increased significantly year-on-year, mainly from the same reason that I mentioned earlier. For the business highlight in the quarter 4, we led the transition to low carbon cement in Thailand and ASEAN. We achieved the penetration rate of 82%. And we also became the first mover in Thailand and ASEAN for adoption of calc cement or LCG, low carbon cement Generation 3. This help us to reduce carbon emission by over 30%. And in order to gain more market share in the residential segment, we launched Smart Value product in Thailand ASEAN market by optimization between quality and affordability. Another highlight on innovative construction material. We have expanded the application of ultra-high-performance concrete technology across our range of infrastructure projects. This technology offers superior strength and longer service life while also supporting cost efficiency and lower environmental impact. For the business outlook, we foresee continued growth in Thailand construction market in this year, driven by public projects and while we see continued growth in regional also. And for our effort, we continue working on cost reduction, optimizing our business portfolio and expanding our low-carbon product. So that's all for my part. Thank you. May I pass to Khun Wiroat.

Good morning, everyone. I would like to add this high highlights for the SCG Smart Living and distribution and retail. First, we are underdoing the strategic business restructuring decided to drive long-term operational efficiencies. Second, we are seeing Vietnam emerge as a primary growth engine within the ASEAN market. And finally, regarding our core strategy, SVP now accounts for THB 2,800 million in sales, making a significant milestone of our portfolio transition. For the outlook in Thailand, the market situation, first is nonresidential segment continue to grow from increasing BI application, while government projects show steady demand. However, residential segment is softening due to the high household debt and loan rejection. For regional market, Vietnam showed strongest demand from the holiday consumption rush. In terms of the financials, this quarter revenue experienced a decline. However, our performance still outpaced overall market in challenging environment. In terms of the EBITDA, our business drop in both Q4 and year last year was primarily driven by retail business streamline efforts aim at the long-term efficiencies. For the net profit was impacted by streamlined retail business. However, excluding impact of retail streamlining initiative, overall performance remained positive for both quarter and full year. Now turning to the Smart Living business highlights. This year, we have prioritized 2 pillar track, expanding our market reach to innovation and driving cost discipline. Starting with our SVP, we successfully scale product range of distribution channels, which lead to SVP accounting for THB 2,800 million in sales, reflecting 2% of year-on-year growth. In terms of the new development, we have launched CPAC Smooth Plus HVA roof, offering durability and modern and smooth finish. Finally, our focus on operational excellence remain our strength to deliver the saving around THB 286 million. For the distribution and retail focusing on growth to technology and integration. First, we have integrated our loyalty program into ONE CRM through SCG Family Plus+ to deliver a better customer experience. This allows seamless point conversion with our partner across our distribution channel. In addition, we are enhancing Homie AI feature for the better understand customer needs. Essentially, the value of our customer is accurate, simplify and smoother journey. Most importantly, it help us to improve lead to sales. In terms of the SCT strategic direction for the retail, we are streamlined the business and improve flexibility and respond to local demand. Our direction is focused on the 4 pillars. One is the shifting from centralization to localization and allow us to leverage our dealer expertise and local advantage to respond more efficiency to market-specific needs. Consequently, this localized approach even drive reduction of overall inventory level by minimize demand and supply mismatch at the local level and continue to expand our product and solution offering with the strong emphasis NBD, HVA, SVP. And finally, we are strengthening our cost competitiveness through more efficiencies like merchandising, sourcing and logistics support from the SCG. That's all the strategic direction for the retailers. And the outlook, we saw that Thailand is in the election period. In this year, the election momentum, we expect to keep the market stable with the government investment as a key driver. Regionally, Vietnam is set to expand driven by real estate cycle and public infrastructure. To navigate this, our internal effort and priority will focus on 4 key areas. First, we optimize our portfolio with value product to reach more customers. At the same time, we continue to drive strategic cost efficiency and lean automation to sharpen our comm edge. And we are also strengthening our capabilities while streamline the retail portfolios. And finally, we will accelerate AI and digital adoption to enhance our performance. Our operational efficiency across the board. For the SCG Decor, the EBITDA excluding nonrecurring is THB 3.3 million and net profit is THB 1.010 billion increased 4% and 5% year-on-year, respectively. If we were to exclude Thai baht appreciation impact, EBITDA was increased 7% year-on-year. For the revenue in Q4 basis, SCG registered revenue of THB 5.3 million on year-on-year basis. Overseas revenue was impacted by appreciation of the Thai baht. In terms of the profitability, SCG Decor has an EBITDA of THB 746 million and the net profit THB 188 million increased year-on-year from continuous effort in cost reduction. Excluding nonrecurring item for FX impact, EBITDA and net profit growth came even positive. That's all for my part.