SCG earnings soar on energy sales, green products

SCG has released its operating results for FY2022, which demonstrated increased sales revenues despite decreased profitability. This was largely caused by a significant increase in energy costs, inflation, China’s economic slowdown, and a petrochemical trough.

In response to these challenges, SCG has taken steps to accelerate the expansion of new businesses and prioritize green products, in order to fulfill the demands of megatrends and seize opportunities for economic recovery and sustained growth.

Notably, SCG’s renewable energy business rose by 78 percent, and the company saw impressive growth in its green polymer sales, which exceeded 140,000 tons and expanded by five times. Additionally, SCG’s energy-saving solutions were well-received by the market, with 40 percent growth, and the company is fostering innovation for sustainable packaging. LSP is also on track to begin production and marketing in mid-2023.

Despite these challenges, SCG remains committed to maintaining solid finances by tightly managing liquidity, cutting costs where possible, and investing prudently in accordance with its strategic priorities.

“All of these are the result of multiple crises stemming from the Russia-Ukraine conflict, rapidly soaring coal and electricity prices, inflation, THB fluctuation, China’s economic slowdown, and the largest petrochemical trough in 20 years,” said Roongrote Rangsiyopash, President and CEO of SCG.

SCG has remained vigilant in monitoring the current situation and has taken quick action to mitigate its impact on the company as a whole. The company has prioritized maintaining financial stability, cutting costs through the utilization of renewable energy sources and digital technology in production, and making prudent investment decisions.

Despite the challenges posed by the current situation, SCG has identified new business opportunities, particularly in the area of green products. These products, including renewable energy, green polymer, energy-saving solutions, and sustainable packaging, are in high demand and are a major global trend that continues to grow. In 2022, SCG’s Green Choice sales rose by 34 percent, representing 51 percent of total sales and surpassing growth targets.

Moving forward, all SCG business units are poised to strengthen their operations and capitalize on these opportunities.

Due to the crisis brought on by the drastically rising cost of coal and electricity, SCG has tapped into the renewable energy sector with a capacity of 234 megawatts in 2022, an increase of 78 percent y-o-y, with a smart grid network for industrial estates and industrial plant networks, hotels, and hospitals. Such the project has recently been installed at the Saha-Union Group in Bangpakong, connecting renewable energy between 10 companies, cutting energy expenses by 30 percent and reducing greenhouse gas emissions by 3,670 tons of carbon dioxide annually,” added Thammasak Sethaudom, Executive Vice President of SCG.

As the tourism and consumption sectors rebound in 2023, the Thai economy is expected to recover, and ASEAN markets are expected to improve with China’s reopening. In addition, coal prices are expected to decline after winter, and inflation has begun to signal a slowdown. Despite the current challenges, SCG believes that it will be able to overcome this crisis and meet new demands.

SCG is leveraging its expertise in renewable energy to mitigate the impact of growing energy costs caused by worldwide market fluctuations in energy prices. In 2022, SCG increased its proportion of alternative fuels from 26 percent to 34 percent year-over-year, and its solar energy capacity from 130 megawatts to 194 megawatts year-over-year. Additionally, the company exceeded its target for reducing greenhouse gas emissions by 3 million tons of carbon dioxide. SCG is also developing carbon capture and utilization (CCU) technology for cement production in Thailand and ASEAN, in partnership with Nippon Steel Engineering and Thai Nippon Steel Engineering & Construction, with the aim of achieving Net Zero 2050.

In addition to its renewable energy efforts, SCG has also made significant strides in developing its innovative green polymer, “SCGC GREEN POLYMER,” which has been well-received by the global market, as evidenced by a 5-fold increase in sales of 140,000 tons over the past year. Furthermore, SCG has expanded into a fully integrated plastic recycling business by acquiring Kras/Recycling Holding Volendam B.V., the Netherlands’ leading waste management company. These initiatives demonstrate SCG’s commitment to sustainability and its ability to adapt to changing market conditions.

Tanawong Areeratchakul, CEO and President of SCG Chemicals or SCGC, said “The acquisition will expand the business’s capability in the storage, sorting, and manufacturing of Post-Consumer Recycled Resin (PCR) for the household and industrial sectors.

SCGC GREEN POLYMER have been certified to international standards by a number of leading global organizations, including EuCertPlast from Europe which verifies that raw material sources for the production of PCR are actually from plastic waste, thereby reducing waste problems; and Recyclass for the development of film coating that improves recycling efficiency for plastic packaging, making SCGC the first in ASEAN to receive this certification”.

Simultaneously, Long Son Petrochemicals Company Limited (LSP), an integrated petrochemical complex in Vietnam, has progressed by more than 98 percent and is set to enter the market in the middle of this year.

SCG is accelerating its smart living business, particularly energy-saving solutions, which are in high demand on the market in light of the rising cost of electricity. More than 40% growth was observed in 2022. Examples include the “SCG Air Scrubber,” a global energy-saving innovation for large buildings, convention centers, and shopping malls.

The system is highly efficient with energy savings capability of 20-30 percent.  It has been installed in seven large buildings, including the Terminal 21 Pattaya Branch and the Kloud by Kbank Siam Square.

“As a result of the project’s positive reception, further investment projects will be implemented to expand the product line to suit a wider range of customer needs. In addition, “SCG Built-in Solar Tile,” an innovative solar panel has been introduced for modern dwellings with design to fit flat with the roof and lower electricity costs by 60 percent.” shared Nithi Patarachoke, President of Cement-Building Materials Business of SCG.

SCGP devises innovation development strategies, adds packaging solutions, and establishes an investment budget and research and development expenditures totaling USD 24 million for 2023 by developing innovative “Nanocellulose fibers” made from agricultural waste used as raw materials in the production of packaging paper and foodservice packaging.

Wichan Jitpukdee, Chief Executive Officer of SCG Packaging Public Company Limited or SCGP shared that SCGP is also ready to expand into the health and composite industries, as well as developing its tissue culture expertise into growing high-value crops and herbs. In addition, it intends to transform waste materials from the production process into renewable energy. The company is in the process of developing “Torrefaction Technology” to increase the efficiency of Biomass utilization and decrease greenhouse gas emissions, further boosting its ESG operations.  

Roongrote Rangsiyopash, President and CEO of SCG, disclosed, “The Company’s unaudited Operating Results for FY2022 registered the Revenue from Sales of PHP 885,276 Million (US$ 16,244 Million), an increase of 7 percent y-o-y, due to Packaging and Cement – Building Materials businesses. Profit for the Year amounted to PHP 33,233 Million (US$ 610 Million), a drop of 55 percent y-o-y, primarily because of lower chemical’s spreads, higher energy costs and a decrease in the share of profits from associates.

Revenue from Sales totaled PHP 192,638 Million (US$ 3,359 Million), in Q4/22, a fall of 14 percent q-o-q primarily due to lower prices and sales volume for chemical products as market demand declined. Profit for the Period stood at PHP 248 Million (US$ 4 Million), down 94 percent  q-o-q because of lower chemicals spreads as well as higher coal and electricity cost.

SCG’s Revenue from Sales of High Value-Added Products & Services (HVA) in 2022 was PHP 303,886 Million (US$ 5,576 Million), or 34 percent of total Revenue from Sales. Additionally, New Products Development (NPD) and Service Solutions accounted for 17 percent and 6 percent of total Revenue from Sales, respectively.

SCG’s Revenue from operations outside of Thailand, including export sales from Thailand, registered PHP 400,808 Million (US$ 7,355 Million), in FY2022, or 45 percent of total Revenue from Sales, similar to the same period last year.

For SCG’s operation in ASEAN (ex-Thailand), the Revenue from Sales in Q4/2022 recorded a 15 percent decrease y-o-y, amounting to PHP 37,329 Million (US$ 651 Million), and 19 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 December 31, 2022, the total assets of SCG amounted to PHP 1,464,443 Million (US$ 26,241 million), while the total assets of SCG in ASEAN (ex-Thailand) were PHP 656,533 Million (US$ 11,764 million), 45 percent of SCG’s total consolidated assets.

The company reported Q4/2022 Revenue from Sales at PHP 3,563 Million (US$ 93 Million), a 10 percent decrease y-o-y from Packaging (UPPC) and Cement and Building Materials business (ceramics).

SCG Marketing Philippines Inc. continued its multi-faceted approach with Hardware and More. It has extended its footprint to include SCG smart tools and assorted items for repairs, fixes, and home maintenance. Last year, two branches opened in Paranaque City and Bocaue Bulacan which significantly increased overall performance. An expansion of the brand portfolio rolled out with over 6,000 SKUs to target customers’ needs. This year, SCG continues to deliver solutions, eco-friendly, and sustainably sourced products and services, in line with Circular Economy notions with plans for another branch in Batangas City.

United Pulp and Paper Co. Inc (UPPC)’s PM3 machine continues to improve production capacity and create innovative products to cater to overseas markets. Recently, UPPC launched CAS, a high-strength corrugating medium, to meet the high-quality demands of export markets. Also, UPPC extended sales of paper products to ASEAN counties such as Thailand and Indonesia, and products are making headways in African regions.

Roongrote concluded, “This year, SCG continues to prioritize maintaining financial stability and liquidity with prudent strategic investments, tightening the purse strings, and reducing energy costs. Simultaneously, it will accelerate business progress to satisfy new needs, invest in innovations, seize economic recovery opportunities, develop solutions to support global megatrends, and strengthen the business.”

The regional market has begun to recover and is projected to expand further. Moreover, SCG is prepared to assist in the strengthening of society. It created jobs for 9,000 individuals impacted by the economic crisis in 2022 to provide them with income and lessen social inequality.