Siam Cement expects southeast Asia demand to boost

Byszheng

Updated Tue, 16 Jun 2015 10:20:07 GMT

According to Reuters, Siam Cement Group (SCG) expects its paper and packaging business to rise by 5 – 10% in 2015 as higher demand from southeast Asia helps offset slow growth at home.

SCG expects domestic demand to rise by 1 – 2% in 2015 due to weak consumption and poor exports, said Roongrote Rangsiyopash, president of its packaging unit. "Domestic demand is not good. Growth in Vietnam should be around 5% and in the Philippines it will be around 6 – 7%," said Rangsiyopash. He said that he expects domestic demand to improve in the second half of 2015 on hopes of better economic conditions, while southeast Asian markets are expected to grow by 5% or more.

SCG had US$2bn of sales from paper and packaging business in 2014, accounting for 15% of its total sales. However, profit from the paper business fell by 30% year-on-year in January – March 2015 due to a weak margin and rising expenses.

According to The Nation, Rangsiyopash said that SCG Paper has been rebranded as SCG Packaging to reflect a shift of its business model to focus on offering a "total packaging solution." Rangsiyopash added that SCG Packaging would offer an integrated range of services for the evolving needs of consumers, primarily in southeast Asia. SCG Packaging is expected to contribute 80 – 90% of the combined paper and packaging sales in the next five years, up from 70 – 75% currently.

SCG, which has packaging production bases in Vietnam, Indonesia, the Philippines and Singapore, has invested to expand its packaging capacity in southeast Asia. In 2014 it acquired a 90% stake in PT Indoris Printingdo, which produces high-quality packaging in Indonesia. SCG is also investing US$122m to add 243,000t/yr of additional packaging paper production capacity in Vietnam. The expansion is expected to be complete in 2017 and will increase its capacity to 2.6Mt/yr in southeast Asia. SCG has also set aside a research and development budget of more than US$11.9m in 2015 to focus on high value-added packaging products that offer high margins.

According to The Nation, Siam Cement is also expanding in the non-paper packaging segment, such as flexible and rigid packaging made from plastics, among others. In 2015 it acquired a 22% stake in Prepack, a 14,000t/yr capacity flexible-packaging producer. Rangsiyopash said that the flexible and rigid packaging sectors were growing faster than the paper packaging market, by 6 – 7% year-on-year.