Enhance business agility to navigate economic challenges

by ND08 August 2024 Last updated at 18:31 PM

VTV.vn - SCG announced its operating results for Q2/2024, demonstrating continuous improvement with increased sales and profit compared to the previous quarter, driven by economic recovery in Vietnam and Indonesia.

SCG has enhanced business agility to navigate economic challenges, including a slow and concentrated domestic economic recovery and geopolitical conflicts. The company is increasing the use of alternative fuels to reduce energy cost, focusing on cost management, targeting high-potential businesses, leveraging AI to boost production efficiency, and offering attractive solutions to customers across ASEAN. Low Carbon Cement is being introduced to the global market, and the Southern Vietnam petrochemical complex will resume testing operations in September.

Thammasak Sethaudom, President and CEO of SCG, said, "SCG's operating results for Q2/2024 have improved from the previous quarter due to increased sales volume from SCG Chemicals and stronger spending power in the ASEAN market, particularly in Vietnam and Indonesia. Furthermore, dividend income from associated companies contributed to a total revenue of 88.380 Trillion VND (US$ 3.542 Billion), an increase of 3% q-o-q, with a profit of 2.556 Trillion VND (US$ 102 Million), up 53% q-o-q. For the first half of 2024, revenue was 174.051 Trillion VND (US$ 6.976 Billion), close to last year's figure. The sales composition included 39% from SCG Chemicals, 27% from SCGP, 16% from SCG Cement and Green Solutions, 13% from SCG Smart Living & SCG Distribution and Retail, and 5% from SCG Decor.

Despite SCG being impacted by the petrochemical trough and tensions from geopolitical conflicts, intense market competition from Chinese imports, and a slow domestic economic recovery due to weak spending power among the middle to low-income groups, SCG has actively enhanced its business agility and operational resilience through several strategic measures: 1.) Energy Cost Management, for example, the cement business in Thailand has increased the use of alternative fuels to 47%; 2.) Focus on Growth Potential Business, such as comprehensive solar energy solutions for residential markets, plants, and industrial estates; 3.) Improvement of Supply Chain and Distribution of Products by employing technology for delivery planning and goods receipt to reduce work time, minimize damage, and reduce errors in the receipt and delivery process; 4.) Application of Artificial Intelligence (AI) for Operation Efficiency, where SCG Chemicals utilizes AI solutions from REPCO NEX to precisely manage machinery maintenance, achieving 100% reliability; and 5.) Deliver solutions that meet both the functional and pricing needs of customers, such as CPAC’s compact concrete mixer trucks, which are designed for urban construction with narrow alleys, capable of transporting up to 2 cubic meters of concrete per trip, facilitating efficient cement usage and reducing waste.

In the first half of 2024, New Products Development (NPD) achieved sales of 26.674 Trillion VND (US$ 1.069 Billion), accounting for 20% of total sales. High-Value Added Products & Services (HVA) registered sales of 53.111 Trillion VND (US$ 2.129 Billion), constituting 39% of total sales, while SCG Green Choice, environmentally friendly products, recorded sales of 93.846 Trillion VND (US$ 3.761 Billion), representing 54% of total sales.

SCG’s revenue from operations outside of Thailand, combined with export sales from Thailand for H1/2024, registered 76.778 Trillion VND (US$ 3.077 Billion), constituting 44% of total Revenue from Sales.

For the second half of 2024, the overall economic landscape remains challenging, but SCG is prepared to respond with agility and stability. The company holds cash and cash under management totaling 54.400 Trillion VND (US$ 2.180 Billion), along with innovative solutions that meet comprehensive customer needs.

Cement and construction related businesses are benefiting from the strong economic recovery in Vietnam and Indonesia. Spending power is rebounding, driven by the Indonesian Government's initiatives to accelerate infrastructure development and the establishment of the new capital, "Nusantara." Additionally, the Vietnamese Government is promoting Foreign Direct Investment (FDI). In contrast, Thailand’s recovery remains sluggish due to seasonal demand declines and delayed government budget allocations.

SCG Cement and Green Solutions is accelerating the promotion of Low Carbon Cement Generation 2, which can reduce carbon dioxide emissions by 15-20% compared to conventional cement. This product is being expanded into international markets, including the United States and Australia, where it has already gained confidence in its quality, resulting in exports exceeding 1 million tons to the United States. Recently, SCG launched the first low-carbon cement in Vietnam, "SCG Low Carbon Super Cement." In Thailand, the market continues to grow, with the usage of low-carbon cement replacing conventional cement by more than 86%. This growth is supported by increasing government construction projects. Additionally, SCG has introduced various models of cement that are of appropriate to better meet the needs of our customers, such as the "5 STAR" brand in Cambodia, "BEZT" in Indonesia, "ADAMAX" in Vietnam, and "Rad" in Thailand.

SCG Distribution and Retail is delivering home improvement products and services through more than 87 retail stores across ASEAN. In the first half of the year, the company expanded the modern trade Mitra10, a retail market expert in Indonesia which offers over 65,000 products. It added two new branches in Sumatra and West Java, regions with large populations, serving more than 1 million customers per month. The goal is to reach 100 branches by 2030. To date, 50 branches are currently operational.

SCG Smart Living is introducing landscape decorative materials, such as SCG pavement tile, to cater to the tourism industry. These tiles can be custom-designed with unique patterns using a specialized shot blasting technique, like the peony pattern for sidewalks in the Chinatown area. Additionally, the brand ONNEX by SCG Smart Living has launched the Air Scrubber system, an innovative HVAC system for small spaces designed for buildings and offices with areas less than 3,500 square meters. This service will be expanded to cover ASEAN and the Middle East.

SCG Decor (SCGD) is pushing a plan to double its revenue by 2030, beginning with the operational commencement of SPC LT by COTTO plant, with a production capacity of 1.8 million square meters per year, targeting revenue of 500 MB. Furthermore, another 3 main projects related to High-Value-Added and durable Glazed porcelain tiles in Vietnam and Thailand are currently under construction which are expected to be commercialized by this year.

Meanwhile, SCG is expanding its construction materials market to India. SCG International, in collaboration with BigBloc Construction Limited, has invested in establishing the first 'Autoclaved Aerated Concrete (AAC) Wall' factory, which produces lightweight wall panels, in Gujarat using the brand 'ZMARTBUILD WALL by NXTBLOC' for its commercial operations. Gujarat, India is a region with high and continuous growth in construction value.

SCG Chemicals (SCGC) has improved due to increased sales volume from the resumption of operations at the Rayong Olefins (ROC) plant. However, in the second half of the year, the industry remains challenging due to lower global demand and new supply additions. SCGC is accelerating the push of its green innovation, SCGC GREEN POLYMERTM, to meet high-demand markets, such as the consumer goods sector. Recently, in collaboration with Dow, SCGC developed a plastic recycling business across the entire value for the first time in the Asia-Pacific region. The goal is to develop recycling technology to convert over 200,000 tons of plastic waste per year in Southeast Asia into valuable circular products by 2030.

In Vietnam, the LSP is expected to restart the entire complex, with both upstream and downstream operations in early August 2024 and beginning commercial operations in October 2024. It is anticipated that commercial revenue will be approximately 15 Trillion VND (US$ 600 Million) in 2024 and 38 Trillion VND (US$1500 Million) in 2025. However, challenges persist due to the global economic slowdown and oversupply in the chemical industry. LSP, being a capital-intensive project, is expected to incur annual depreciation and interest expenses. Despite the challenges, SCG's existing chemical operations in Thaiand remain profitable due to its focus on efficiency and product offerings.

SCGP is focusing on expanding its production capacity to meet the packaging demand from the tourism and service sectors. This includes managing raw materials and energy costs, as well as driving growth in high-potential businesses. Recently, SCGP has expanded its packaging business into medical supplies and labware by investing in VEM (Thailand) Co., Ltd., a manufacturer of high-performance polymer injection molding parts. This investment will enhance the production capabilities of Deltalab, S.L. and Bicappa Lab S.r.L., members of SCGP, to meet demand and broaden SCGP's international customer network more comprehensively.

SCG’s new business, SCG Cleanergy, is growing well according to plan, aiming to increase the proportion of solar energy installations for high-demand industrial customers. In the first half of 2024, the total production capacity reached 522 megawatts. For the Rondo Heat Battery, which stores thermal heat from green electricity sources, the construction of the world's first unit for the cement industry is underway at the SCG cement plant in Saraburi province. This unit is expected to begin operations in 2025 and will serve as a model for other industries.

For SCG’s operation in ASEAN (ex-Thailand), the Revenue from Sales in H1/2024 recorded a 12% increase y-o-y, amounting to 33.007 Trillion VND (US$ 1.323 Billion), This growth was primarily driven by improving market conditions in regional operations, especially in Vietnam. This contributed to 19% of SCG’s total Revenue from Sales. This figure includes sales from both local operations in each ASEAN market and imports from Thai operations.

As of 30 June 2024, SCG's total assets amounted to 655.717 Trillion VND (US$ 25.767 Billion). Of these, the total assets of SCG in ASEAN (ex-Thailand) were 300.120 Trillion VND (US$ 11.794 Billion), or 46% of SCG’s total consolidated assets.

In Vietnam, the company reported Revenue from Sales for H1/2024 at 16.362 Trillion VND (US$ 656 Million), marking an increase of 12% y-o-y. This rise was mainly due to an increase in sales from Long Son Petrochemicals Company Limited (LSP).

SCG in Vietnam is driving sustainable investments to bolster both local and global economic recovery. The flagship project Long Son Petrochemicals (LSP) will commence commercial operations in Q3 to meet local plastic resin demand and support related industries. These resins can be converted into essential products, such as plastic packaging, auto parts, and electrical appliances, enhancing the quality of life.

To cater to the northern market, Duy Tan Plastics, part of SCGP, has launched a flagship showroom in Long Bien, Hanoi. This showroom is SCG's largest investment in Vietnam after Ho Chi Minh City and Da Nang.

In line with the "Collaboration for Greener Vietnam" strategy and the national goal of Net Zero by 2050, SCG Cement and Green Solutions introduced SCG Low Carbon Super Cement. This environmentally friendly product reduces carbon emissions by 20% during production, meeting sustainable building standards and promoting SCG’s strategy of Inclusive Green Growth.

To pursue its commitment to reducing inequality as part of SCG’s ESG 4 Plus strategy, SCG focuses on educational programs. The ESG Engagement program for 100 SCG Sharing the Dream scholars promotes an ESG mindset through plant tours and a camp for developing community-help ideas. Additionally, SCG collaborated with the Ba Ria - Vung Tau School for Children with Disabilities and DRD Vietnam to provide career guidance and job opportunities for children in need.

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