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Edited Transcript of SCC.BK earnings conference call or presentation 29-Jan-20 8:00am GMT

Q4 2019 Siam Cement PCL Analyst Meeting

Bangkok Feb 5, 2020 (Thomson StreetEvents) -- Edited Transcript of Siam Cement PCL earnings conference call or presentation Wednesday, January 29, 2020 at 8:00:00am GMT

TEXT version of Transcript


Corporate Participants


* Nithi Patarachoke

The Siam Cement Public Company Limited - President of Cement-Building Materials Business

* Roongrote Rangsiyopash

The Siam Cement Public Company Limited - President, CEO & Director

* Tanawong Areeratchakul

The Siam Cement Public Company Limited - President of Chemicals Business

* Thammasak Sethaudom

The Siam Cement Public Company Limited - VP of Finance & Investment and CFO

* Wichan Jitpukdee

The Siam Cement Public Company Limited - President of Packaging Business




Operator [1]


Okay. Good afternoon, ladies and gentlemen, and welcome back to SCG for Analyst Conference for the Full Year 2019 Results. For safety purposes, independent of an emergency, please note the 4 exits in each of the corners of this room.

Now onwards to this afternoon's program, today's presenters are as a follow. Beginning with the consolidated results, the CEO of SCG, Khun Roongrote Rangsiyopash. The financials will be highlighted by the CFO of SCG, Khun Thammasak Sethaudom. For the business units, beginning with the President of the Cement and Building Materials business, Khun Nithi Patarachoke, and he'll be supported by Khun Chana Poomee. Next is the President of Chemicals business, Khun Tanawong Areeratchakul, and he'll be followed by the President of Packaging Business, Khun Wichan Jitpukdee. Thank you.

And now on to today's exciting program beginning with Khun Roongrote.


Roongrote Rangsiyopash, The Siam Cement Public Company Limited - President, CEO & Director [2]


Good afternoon, and happy Chinese New Year. In the first -- in the last quarter of last year, our total revenue was THB 106 billion, which is down 9% from the previous year and 4% from the prior quarter. The decline actually came from the lower chemical prices.

In terms of EBITDA, I think we have here EBITDA including dividend and EBITDA from operations. In terms of EBITDA including dividend, EBITDA actually was THB 20.7 billion, which is 3% higher from the prior year. EBITDA from the operations, on the other hand, was THB 13.2 billion, which is a 19% decline from the same period of 2018. As you can see, operationally, the Chemical's EBITDA actually declined quite significant from the prior year. As you are all aware, the Chemical's margin dropped significantly. However, the dividend and actually also came from the chemicals associated company was the one that actually helped offset the decline in the EBITDA for the period. And dividend, as you all know, actually paid from the earnings of the prior year.

Equity income, the -- at the same -- along the same line, was the 2.8 and the 10% decline from the same period of 2018. Profit in the last quarter was THB 7.1 billion, and that's including stock loss of THB 1 billion and then another THB 300 million actually came from the impairment and restructuring of the CBM and OC business.

In terms of the full year result, total revenue was down 8% to THB 438 million; EBITDA dropped 13% to THB 74.9 billion; and profit was declined 28% to THB 32 billion. This, including the provision for the severance pay, and this is in line with the change in the level at the beginning of the year, that's the increase the last [time] payment when the employees retire from 300 days to 400 days.

In terms of the revenues, Chemicals, more or less the same as Cement-Building Material, which is 41% for Chemicals and 39% for Cement-Building Materials, and Packaging accounted for 20% of the total revenues.

In terms of profit, as you can see here, Chemicals now is 48% of our total profit for the whole year. Cement-Building Material is 17% and Packaging is 16%, and other is the -- our minority investment in various associated company accounted for 19% of the total profit.

Non-Thai operations account for 41%, and that's more or less the same percentage as of the prior year. Export, however, declined by about 22%. And as you can see here, the decline in export was -- came mainly from the Chemicals product prices.

In terms of the ASEAN operations, as you can see here, the total ASEAN operations, including export, declined by 2%. High Value-Added products and services last year was around THB 180 billion, and that's declined by about 3% from the prior year, and that's mainly from the chemical prices.

R&D and innovation spending was THB 5.6 billion, and that's slightly increased in terms of the percentage from the prior year. Right now, our R&D and innovation spending accounted for about 1.3% of the total revenues.

Now I'd like to pass it to Khun Thammasak for the financial updates.


Thammasak Sethaudom, The Siam Cement Public Company Limited - VP of Finance & Investment and CFO [3]


Okay. Good afternoon. For the financial update, this is the EBITDA. On asset and EBITDA margin, you see the -- this decline due to the lower performance of the Chemical Business. And if you look at the EBITDA on asset at 11.8%, this one include only half year for the Fajar performance because we acquired the Fajar mid of last year. So you can see that if we adjust this into full year, this figure will go up a bit.

So EBITDA margin stood at 14% by the end of the fourth quarter. For net debt and net debt on EBITDA decreased a bit due to improve in the quarterly EBITDA, and net debt on equity stood at 0.6. For the capital expenditure, registered at THB 77 billion last year, including the [THB 35 billion] acquisition of the Fajar and Visy transaction last year.

CapEx for the Chemical Business expansion in Vietnam, this is Long Son Petrochemicals and Map Ta Phut Olefins, was already included is, and it's around THB 30 billion last year.

For interest and finance cost, it was around THB 6.4 billion, and interest cost stood at 3.1%. And what has approved to propose to the AGM that for the dividend payment at THB 14 per share, about 40 -- 52% payout from the net profit or about THB 16.8 billion, and this comprise of the interim dividend of THB 7 in the first half and the THB 7 for the second half. Cash and cash under management is THB 45.7 billion by the end of last year.

For CapEx and investment this year, we estimate at THB 60 billion to THB 70 billion, and this include the ROC project. For the IFRS 9 and 16, which will be effective for the years 2020 onward, the first-time adoption of the t IFRS 9 and 16 will result in an increase in the total asset, total liability and retained earning. It's around 3% in terms of the total asset increase and 4% for the total liabilities. So this is due to the adjustment of the fair value measurement. We've done -- the impact to SCG profit and loss will be quite small, not significant.

There is a change in the presentation format for the business unit performance. Starting from last quarter, management has chosen to reflect the intellectual property shot into the reporting of business per unit performance. So I show you the before and after, just to show the detail in case that you have to update your model. You can see that the consolidated figure hasn't changed, but there is the deduction of the IP from the business sector.

And I would like to inform you that we filed the IPO of the SCG Packaging Business last month, and the plan is to raise the capital up to 30% of the SCG Packaging total shares outstanding after the IPO, meaning that SCG aim to hold at least 70% after the capital increase. The capital increase will be used for the business expansion, and detail are in the information filing document.

I will pass to Nithi.


Nithi Patarachoke, The Siam Cement Public Company Limited - President of Cement-Building Materials Business [4]


Good afternoon. For CBM, I would like to start with market situation. Cement demand were generally positive for ASEAN countries and continue high competition across the region. For Thai market, grey cement demand grew 1% year-on-year.

Thanks to the continuous growth in the megaproject infrastructure and slightly improvement in the private sector, the average cement price increased 3% to 4% to the range of THB 1,750 to THB 1,080 per ton. Ready-mixed concrete demand contracted 3% year-on-year, but the average selling price of ready-mixed concrete increased 3% to 4% year-on-year in the range of THB 1,700 to THB 1,750 per cubic meter. Demand of housing product dropped 4%, and demand of ceramic tile contracted 1% year-on-year.

ASEAN market for this quarter, Cambodia cement demand grew at 34% year-on-year as a result of continued strong growth from Chinese investment. Indonesia cement demand increased 3% year-on-year, mainly from infrastructure projects. Myanmar cement demand slightly grew 2% year-on-year, driven primarily on the government projects. And Vietnam demand declined by 4% year-on-year because of the tightening of the property loan control.

Revenue from sales. In the fourth quarter, revenue from sales increased -- decreased 1% year-on-year, mainly due to the lower sales from non-ASEAN market. For the full year, sales increased 1% year-on-year, mostly driven by the growth of domestic distribution and retail.

EBITDA and profit for the period. EBITDA for this quarter decreased 11% year-on-year and minus 6% year-on-year, respectively, from the weak demand of ceramic tile in our market. If exclude nonrecurring from ceramic business restructuring, EBITDA decreased slightly, only 1% year-on-year. Profit increased 22% year-on-year. For the full year, EBITDA and profit increased 3% year-on-year, which mostly contributed by the higher margin of domestic demand -- domestic cement and construction solution. However, without the nonrecurring expense, EBITDA and profit for full year increased 5% and 29% year-on-year, respectively.

ASEAN and other sales in fourth quarter and full year decreased 5% year-on-year, largely because of lower sales in non-ASEAN market. Ceramic tiles, all markets, average selling price of ceramic tile remained soft because of high competition and weak demand in all markets.

Thailand sales segmentation. Domestic sales for this quarter grew 1% year-on-year. The full year grew 4% year-on-year, which mostly driven by the growth of domestic distribution and retail business. Service Solution sales are approximately 3% to 4% on sales from cement and housing product in 2019.

Thailand grey cement segment. Cement demand in Thailand this quarter increased 1% year-on-year from all segment. The demand from government segment remained a major contributor, which was mostly derived from the continued asset growth in the mega projects. The private segment slightly improved from the previous quarter, even though the domestic consumption remained under the decelerated trend, principally due to the lower consumer confidence together with a tightened liquidation of the market loan.

This time, I would like to inform the progress of the service solution, follow-up on the service solution there last year. First, we have joined hand with start-up company, MyCloud Fulfillment, to take a step forward in cooperating digital technology to deliver Fulfillment Service.

Secondly, SCG Roof Renovation, which provide repairing services for all roof leakage and reroof, with drone technology for site exploring and for the application -- roof application for a more convenient and speedy and safe services.

Number three, CPAC Solution Center. This is the co-working space, which we serve as a center for technician and contractor who are looking for consulting service and construction technology solution, which help them manage costs more efficiently and save transaction time.

Number four, we launched 5-flagship construction solution, including floor solution, pipe and beam column solution, [post-intern and PCAS] were our solution for pastelling service and farm solution to build standard with speedy transaction, and we can control budget, too.

Number five, we have just established BIMobject Thailand Company and website, biminone, to serve as BIM Library Platform. BIM is 3D model-based process that combine architectural practices, structural design system to more efficiency plan and construction deposit, improved decision and detect the site earlier, prior to construction. This will help to speed up construction management and better cost-efficient method. This is just our update for last year.

Another one about the active omnichannel retail. Right now, most of the customer looking to build a home start searching for information from online channel, almost 90%. They also switch between searching online and offline as long as 6 to 10 -- 6 to 1 year, they -- when they build the house. So we have been developing the active omnichannel called SCG Home and website, scghome, which enable SCG to connect with our customer both online and offline with seamless experience.

Second, we also achieved opening 11 Retail Franchise Format Store last year, and we aim to have 30 store in total by the end of this year. Thirdly, we brought Virtual LED technology for physical retail store for the customer -- for the shopping experience to help them see the [workshop] Plan of their home before construction.

And the last one, we also launched Q-Chang, a contractor matching platform that utilize over 300 contractors from SCG ecosystem to indicate services and solution to product with personalized offering. In the future, we will gradually deliver more solution and meet the market -- meet market demand, customer need and enhance customer experience.

The outlook for this year. ASEAN demand for grey cement and building materials product are expected to see growth in most market. Thailand domestic demand for grey cement is expected to be stable growth in this year, same as previous year. Thailand domestic demand for housing product and ceramic tiles are projected to remain soft.

For company update, ceramic business in Indonesia is in process of restructuring with the purpose of production centralization for enhancing efficiency. CPAC has entered into a joint venture agreement with BIMobject Sweden to establish BIMobject Thailand, which is expected to commence in second quarter this year.

And the last page, about our year of transformation. As we mentioned before that, SCG has been recognized as a leading manufacturer for cement and building materials for 100 years. Now we have been transforming our business to ensure our competitiveness in 2 main areas. First, we're actively seeking new growth in retail business by transforming our manufacturing outlet to be active omnichannel for retail to provide seamless customer experience. Second, at the same time, we have been transformed from building material producer to be service solution provider to capture growth opportunity in renovation market by leveraging digital technology and construction technology. Now customers do not only want the high-quality products, they also expect to have high standard and stay with -- in budget control. They also need expert to advise and channel to access the product and service, have to be convenient, easy and fast from anywhere, any time. With this region, the whole construction business, including product, service and distribution channel will be completely transformed. This year, we focused on the 2 initiatives. First is the SCG Home active omnichannel retail, and second is the CPAC Construction Solution.

This all from the CBM, Khun.


Tanawong Areeratchakul, The Siam Cement Public Company Limited - President of Chemicals Business [5]


For the Chemical business in the Q4, I think that if the -- I think you can recall there's so many things happened actually in the fourth quarter, I mean, mainly incident happen and -- especially in the Vietnamese. So this is the recap, summary that -- what happened and after those incident. For crude oil in the fourth quarter, actually the crude oil slightly increased compared to the third quarter. And Naphtha, similar to the crude, naphtha also come up -- came up from the tight supply, especially after the geopolitical tension in the Middle East. And of course, after the cost -- the naphtha price went up, the HDPE compared to naphtha declined. And it is because of not only the demand -- to certain demand, but also the naphtha price, the Thai supply.

PP and Naphtha gap dropped slightly from the expectation of the new capacity, I mean, from China and from Southeast Asia, like [lap setup].

But if you look at the PVC gap, PVC and EDC, you can see that this is maybe one of the bright spot that slightly improved, and this is mainly due to the stable of the PVC demand and also the softening of the fuel stock price. MMA and naphtha gap also declined, and this -- and mainly due to the demand and additional supply in Asia. Butadiene and Naphtha gap also dropped, and again this is mainly due to the soft demand and also new capacity coming up.

So when you look at the -- like I mentioned about the HDPE gap fall, the HDPE gap Q4, the gap is $300 per ton. Lately, it was 34% Q-on-Q. And if you look at especially in December, it's quite low. I mean that'd be something below the $250. And to date now, the gap seemed to be -- you'll see the positive improved with -- in the first quarter.

PP-Naphtha gap in the fourth quarter also dropped 13% Q-on-Q. And again, like I mentioned earlier, that it is the expectation of the new capacity. But if we look at, I mean, the outlook in Q1 that the gap seem to be slightly improved.

PVC and EDC gap. The Q4, if it compared to Q3, more or less the -- I mean, it went up only 1% Q-on-Q, but it is quite stable and mainly due to the stable demand after PVC.

Benzene and toluene, actually, the Q4 gap declined and mainly due to the new capacity start-up, but if we -- I mean, from a -- I mean, gap today, what we have seen that new capacity is still not coming up, so it means that the gap seem to be improved after Q4. And toluene and naphtha gap also declined and mainly due to the poor paraxylene economics. MMA and naphtha, compared to the third quarter, also declined. And this is again from the weak demand. And butadiene also declined and mainly due to the soft demand and also new capacity in the fourth quarter.

But if we look at the polyolefin, you can see that the Q4, the volume is slightly dropped 4% Q-on-Q and 4% year-on-year and mainly due to the yen demand slowdown. And this situation like wait-and-see sentiment because now people with -- now they -- I mean, at that time, they wait for the U.S.-China trade war settlement. So now I think now what we can see that there is a good improvement. But if you look at the full year volume, you can see that we run at full capacity compared to 2018 and 2019.

PVC, like I mentioned earlier, that is a bright spot that what we have seen. There's a good -- I mean, a stable demand, and Q4 volume flat Q-on-Q. But look at full year, total volume compared between '18 and '19, the total volume slightly come up 1%.

For financial, the revenue in the fourth quarter decreased 6% Q-on-Q and mainly from the lower product price and the effect -- I mean, Thai baht appreciation. And if we look at full year to come -- I mean, '19 and '18, the revenue declined 20%.

EBITDA, like, you can say that now EBITDA improved, come -- went up Q-on-Q and year-on-year. And actually, from the association, as Khun Roongrote mentioned that we have -- I mean, our association, we also have a very good hedging and contribution, there's a cap accumulated of the performance that they did a really good job for the contribution. Typically, we have a dividend in the Q2 and Q4. So this quarter, the contribution from the association is quite substantial. So compare full year '18 and '19, the EBITDA declined 29%.

Internal profit. Profit declined 8% Q-on-Q and 43% year-on-year. And actually, like Khun Thammasak mentioned that there's one item that eventually lost THB 1 billion that maybe you can see that there will be kind of a discrepancy between EBITDA and profit, but this is the item that what we can see the difference in. So if we compare full year, the profit declined 46%.

Outlook, actually, now the crude oil price, if we -- as we know that there's the incident happened in China. So now we see a lot of volatility in term of the crude oil price. I mean, in the past, we'd not -- the crude oil went down and come back -- [leap now] back to uncertain level. So -- but what we have seen, we believe that the demand expect to be weak -- to weaken due to the seasonal of the refinery now and including the incident that happened. And naphtha, what we foresee that will be stable, mainly due to the -- there will be a heavy refinery maintenance in the Middle East. So the -- actually, the naphtha, a bit tight supply.

For polyolefin, we -- what we anticipate that we'll see the demand will improve and from the positive trade war progress and also tight supply from the maintenance in the Middle East. But for the negative impact from the virus outbreak, I think just what we have to monitor there may be a combination of the signal. On one hand, in term of the currency now seem to be weaker, but this is a positive for the Chemical. And this is -- I think this situation we have to monitor closely.

For PVC demand, we believe that the demand will improve. And due to the upcoming of the construction season, then there's a limited supply in Asia.

The company update. What I would like to update that this year, we will have turnaround -- our MOC turnaround for 45 day in the second quarter. And the estimated volume loss will be in the range of 120,000 or 130,000 ton. But actually, what we have to do, we will try our best if we can import either ethylene or propylene we can (inaudible) so this is depend on the market at that time.

The debottleneck of the MOC now, we have a good progress now that what we can see. We make a progress on plan and what we plan to start up in mid of the 2021.

For Long Son Petrochemicals, the forecast also on plan. Instead, you can see that -- earlier that we complete the site preparation and complete the fundamental of the infrastructure that we're ready to do the construction activity and also the jetty.

This is some example of the HVA product that what we mentioned. You can see that when we mentioned about EBITDA and profit, you can see that, really, I mean, the gap is quite low. If you compare between the, if I recall, 2013, at that time, I think our EBITDA margin allowed 3%. But for this year, our EBITDA margin is 11%. So this is mainly due to the -- we -- I mean, we focus a lot on the HVA product.

So that's all I have. May I pass it back to Khun Wichan.


Wichan Jitpukdee, The Siam Cement Public Company Limited - President of Packaging Business [6]


Thank you, Tanawong. And good afternoon, khap. Next will be the Packaging Business and the IPO journey. May I start with the recap of the Thailand and ASEAN packaging market in 2019. In the past year, we have been observed 3 major trends shaping the ASEAN packaging industry.

Start from the first one. High household consumption growth that continue to drive up demand for packaging. In 2019, in Thailand, the packaging market growth 4.3%, while ASEAN, it was 5.5%. However, SCG Packaging total sales volume growth 19% year-on-year.

Second, the rise of e-commerce. We know already the rise of e-commerce that happened early days. E-commerce in Thailand growth at 46% and in ASEAN at 38%. E-commerce sales growth or SCG Packaging in Thailand growth 100% year-on-year.

Third trend that we observe, the shift in lifestyle of consumer. We see more demand that fit to their needs, especially for those young generations. This is proved by the food service market growth in ASEAN [it only] grow 3.3%, but for SCG Packaging food service sector under the Fest brand has been grown 51% year-on-year. So this is improving and summary of the Packaging Business for the past year.

So let's move to Packaging Business performance. May I start with the revenue by segment. We have 2 segments, integrated packaging chain, which account for 80% of THB 89 billion for the last year and fibrous chain account for 20% of total sale last year. With the integrated packaging chain, 80%, 64% is consumer goods and another 36% is industrial packaging and others. For consumer goods, food and beverages, 39%; fast moving and consumer goods 14%; and the rest 11%, electronic and electrical appliance.

Let's see the market in ASEAN. Food and beverage improved for the fourth quarter last year because of the season of celebration quarter. This is for the season of celebration on the last quarter of every year. However, this has all increased by the frozen chicken export to the European country that's grown a lot.

For the FMCG also, this is the seasonal quarter that's for celebration and got the promotional campaigns from all the suppliers, especially those 11/11 for all country in ASEAN.

For E&E, actually, the export has dropped, but this is offset by the reallocation product from China to Vietnam that made in ASEAN more stable in the past quarter.

For the revenue sales by countries, Indonesia has been growing from 3% up to 12% for this year. All the rest has been reduced. Thailand reduced from 60% to 77%; Vietnam, 17% to 14%; and the rest has been reduced.

But market for each country, Thailand fourth quarter has been stable because of the food and beverage has been growing. But the -- again, the export of the E&E has been reduced, so this is offset by these 2 segments.

For Vietnam, they have been growing because of prepare for the stock of the new year and prepare before the shutdown for -- in January. And also they get the benefit from reallocation from China to Vietnam, especially in E&E.

Indonesia and the Philippines has been tough because of long holiday before the year ends.

Sales by category. For integrated packaging chain, performance and polymer packaging and packaging paper has been growing, while the paper-based packaging had been flat. Performance and polymer packaging account for 8% and delivered new growth year-on-year, 12%.

Packaging paper account for 58% and year-on-year growth -- revenue growth at 8%, while the paper-based packaging has been flat. So I will explain that later in the detail in the fiber-based packing for volume.

For integrated packaging chain come down to performance and polymer packaging sales volume. The volume has been increased 41% year-on-year and 20% Q-on-Q, both domestic and regional. This is for main 2 reason: because we do pre-marketing for the second factory of vertical flexible packaging in Vietnam; and the second, because of acquisition of the Visy in September that increased the volume of the performance and polymer packaging. This leaves out for the total year, the volume increased by 18% to 37,000 ton a year for the flexible packaging.

For paper-based packaging, the volume for first quarter is 202,000 ton, which is flat year-on-year and flat Q-on-Q. But if look down a bit in the detail, for domestic Thailand, has been increased 1% total year. But for the regional, reduced 1%. This is because of the expandable green tech (inaudible) we call green cotton. So with our technology to leverage this technology from Thailand to region that made the board accommodation, meaning the box is lighter, but the same strength as it can, so its net volume reduced with -- but in terms of the margin, we increased the margin. So this is the reason.

For packaging paper sales volume, the volume in last quarter is 982,000 ton, which 61% year-on-year and flat Q-on-Q. And again, this is contributed by the major acquisition of Fajar. And growth of the whole year, the volume increased by 77% of the packaging paper sales volume.

For fibrous chain, the total sales volume in last quarter, 159,000 ton, which 5% reduced year-on-year and 5 -- 4% reduced Q-on-Q. This is because of the demand of [dump] and because of the U.S.-China trade war. And on -- for the whole year for the fibrous chain, the volume has been reduced 4%.

So for total sales volume, the whole Packaging Business last quarter, 1.1 million tons. Now we can achieve 1 million for the quarter, and this 45% year-on-year increase and minus 1% Q-on-Q. And cost the whole year, as mentioned earlier in the first slide, total, so Packaging Business sales volume grow 19% year-on-year in total.

For revenues from sales by business. Fourth quarter, the sales at THB 23 billion, 9% increase year-on-year, but 6% reduce Q-on-Q. For the whole year, THB 89 billion compared to last year, increased 2%. You see the volume grow 19%, but the revenues from sales increased 2%. But this is the major confirm the price of both packaging paper and the short fiber has been reduced from the beginning of this year. This is mainly because of the U.S. and China trade war.

For EBITDA and profit for the period. EBITDA fourth quarter, THB 3.7 billion, which is the 4% increase year-on-year, reduced 11% Q-on-Q. And conclude, the EBITDA the whole year is THB 15 billion, 3% higher than last year's.

Profit for last quarter, THB 1.1 billion, reduced 16% year-on-year and reduced 19% Q-on-Q. And this conclude the profit of the period of THB 5.2 billion has reduced 13% from last year. But if we add up the nonrecurring, like severance pay, from 300 to 400 days, another THB 338 million, this is become THB 5.6 million. The reason of this down because of -- mainly because of the fibrous chain. You can see at the bottom of the table. See, in the fourth quarter, the EBITDA margin of the fibrous chain down to 3%. Nevertheless, for the whole year of the EBITDA margin of fibrous chain this year is 7% compared to last year, 12%. However, for the integrated packaging chain is really strong and still high growth. The EBITDA margin of the integrated packaging chain average for this year, 19%, compared to last year, 18%, which conclude that the EBITDA margin compare this year and last year is still maintained at 17%, still a healthy EBITDA margin.

In addition to that, we prepare this graph. In addition to the cost of the severance pay that nonrecurring, we still -- in the past year, we have the expenses of the Internet expenses. And of those, the investment and loss of the ForEx investment of the Fajar and Visy. If we include this figure, the profit will become by THB 6.1 billion. But that's why we need the IPO journey to further grow -- to grow the business further.

Update a bit about the synergies with the Thai and Indonesia, all those, the acquisition. The revenue and the synergy are on the process. The product allocation between Thailand and Indonesia and Vietnam and the Philippines building the arrangement. The capacity expansion, we improve -- we can -- we see the efficiency of Fajar has been improved for the past 6 month. And we also have the Fajar plant to update in the next few slide.

For vertical integration, before acquisition of Fajar, we have box plant and then we purchase paper from other. Now the box plant purchase the paper from Fajar, this will increase the integration level.

For technology and know-how and management exchange, the optimization and the simulation has been trained, has been shared to the Fajar people.

And the financial synergy, this is -- we [release] the long-term loan and we adjust the portfolio that will reduce the interest expenses.

Outlook. Demand of packaging is expected to increase, especially in the segment of E&E that will recover after New Year's. For regional packaging demand, we still believe that this will be increased, except in Vietnam because Vietnam has a holiday for the Chinese New Year.

And packaging paper price expect to increase because of the improved of the condition and the demand of the regions.

Update for the business growth for the 3 country, start from Vietnam. As mentioned earlier, the flexible packaging has been growing because [VP] marketing. This forecast 95%, so expect to commercial by the first quarter of this year. And actually, this month in January, some machine already started up, so it's ready to run and ready to grow. This -- capital expenditure for this factory is almost THB 600 million.

For Indonesia, Fajar Factory 2, which is in Surabaya, the first factory in Jakarta. This factory is second to in Surabaya. This capacity, 400,000 ton, and the progress line now 62% progress and expect that to start up in the third quarter this year. This, we add the capital expenditure of THB 1.8 billion for this factory -- second factory of Fajar.

For the Philippines, paper machine #3 will be started up in the fourth quarter this year. Now the progress is 54%. This investment is THB 5.1 billion, and this will double capacity to 460,000 ton per year.

In addition to that, in last quarter, in Vietnam, we have debottleneck paper machine #2. And importantly, in Malaysia, for the second quarter, we finished the factory 3 [up for duty full-service] with packaging and we close now on the first factory and we [innovate] and build a new factory pantry. And the IPO that Khun Thammasak already mentioned that we're filing on '19 and we're waiting for the SEC approve for that, so we can go further step. And this is a big milestone of SCG Packaging.

We see the growth opportunity for SCG Packaging in the future. In Thailand, for sure, we have strong enough. But we believe that Vietnam into this year and the Philippines, we can see we have a lot of growth for us to grow in the future. That's why we need IPO that will strengthen our growth in the future.

In addition to that, in Malaysia, on the bottom, you see here, we forecast Malaysia to be the export hub for the food service products for this region.

I will start prepare you for the pineapple puff in front of you or someone called the corn puff. All those 100% that packaging produced from our factory in Malaysia, I asked my staff to prepare the puff for me. They don't prepare. They prepare me Big Mac instead. You know why? I was working in the Philippines for 8 years, and this is my favorite. My staff said, "They don't give me a puff. They give me dinner is a Big Mac." The important is that all 100%, this packaging, produced from our company for Malaysia. And we believe that we can grow this business. And this has been export to Japan, Thailand, Philippines, Indonesia, of course, in Malaysia and this region. So this is the thing that we try to leverage and try to manage a part for all the regions because this will grow with the IPO and all that all the packaging business. Thank you. (foreign language)


Roongrote Rangsiyopash, The Siam Cement Public Company Limited - President, CEO & Director [7]


I think, in summary, the Cement-Building Materials started to show a better result. We're also targeting the new growth in the retail and distribution business for home products. At the same time, as you are aware, Chemicals is the -- continue to be in a very low cycle. But at the same time, the -- we believe that our portfolio of products is in a much better and stronger position than when we had the last tough cycle in 2012.

Packaging, as Khun Wichan mentioned, you could see the growth opportunity last year and also going forward. So I think as we are waiting the -- for the IPO approval from the SEC, this is going to be a very solid future growth.

I think if we look at a lot of factors that we are facing today, a lot of headwinds, I think the trade war, we -- since we stop for a while, I'm sure that during the next few months, that issue will start to come up again. Geopolitics in the Middle East, I think that's the cost of everyone concerned. At the same time, the Thai also have some factors starting from the delay of the budget. The situation in terms of the impact from the coronavirus outbreak, which the -- will impact somewhat tight local consumption.

But I think from our standpoint, I think the -- our record of the transforming and changing the -- our business model has proven that every time there's a dip of prices for SCG, we seem to be able to transform and make some changes and emerge as a much stronger company.

I think in terms of Cement-Building Materials, the aim is to capture the growth in the solution and renovation segment, at the same time, trying to get as much benefit as we can from the growing retail and consumption sector within the region.

Chemicals, I think the emphasis is on the high value-added products as well as the technology development in order to distinguish our products from the competitors and from the mainstream products. I think the emphasis is also toward the circular economy products. So I think that's going to start to shape up the -- our portfolio in the future.

Packaging, I think there is quite obvious that we will ride through the consumption growth in line with the ASEAN consumers' spending. And I think we also try to position ourselves for the e-commerce and the related delivery service packaging.

So I think this is the end of our presentations in terms of the business summary and also the outlook and the strategy. Thank you.