UPDATE 2-Petchems shield Siam Cement's prospects from Thai unrest

Thu Jan 30, 2014 5:36am EST

* Q4 net profit 8.2 bln baht vs forecast 6.6 bln baht

* 2014 sales seen up 10 pct, ASEAN market seen up 14-15 pct

* Focus on ASEAN expansion despite political unrest at home (Adds PTTEP earnings paragraph 12)

By Khettiya Jittapong

BANGKOK, Jan 30 (Reuters) - Thailand's biggest cement producer, Siam Cement PCL, expects a surge in demand for petrochemicals in Asia to save it this year from the fallout of a domestic political crisis that has crimped demand for its core products.

Siam Cement is Southeast Asia's biggest producer of downstream chemicals for plastics and the region's second-largest cement producer. It forecast growth in cement demand this year to fall below the 7 percent logged in 2013 but petrochemicals demand is seen rising to drive overall growth.

"The outlook of petrochemicals will be good this year as demand has improved in line with the global economic recovery," Chief Executive Kan Trakulhoon said on Thursday, without specifying a figure.

"The weak baht will be positive for our petrochemicals exports, but we may be affected by rising fuel costs," he told an earnings briefing.

The company is a net exporter of chemicals, cement and paper products and is expected to report a 13 percent increase in net profit to 38.6 billion Thai baht ($1.17 billion) in 2014, according to Thomson Reuters I/B/E/S which gathers data from analysts.

Bangkok has been gripped by anti-government protests since November which have weakened the baht currency to near four-year-lows against the U.S. dollar and hurt tourism as well as domestic demand. The central bank last week cut its forecast for economic growth this year to about 3 percent from an earlier projection of 4 percent.

The petrochemicals unit accounts for about 27 percent of Siam Cement's earnings, and robust demand from Asia for plastics, used in everything from car making to consumer goods to construction, has helped boost margins for producers.

An almost 200 percent year-on-year gain in the unit's earnings before interest, taxes, depreciation and amortisation (EBITDA) helped the company post a forecast-beating 19 percent year-on-year rise in net profits for the fourth quarter and a 56 percent increase in its 2013 profit.

UNREST WEIGHS ON OUTLOOK

The company's core cement business saw EBITDA increase 27 percent year-on-year. Kan said cement demand grew only 2 percent since the beginning of this year, versus a 6 percent growth in the fourth quarter of 2013.

"If the political crisis is prolonged, it's likely that cement demand from public investments will be negative. This should drag down the overall growth," he added. The company was hit by a foreign exchange loss of 600 million baht in 2013 due to hedging.

Domestic cement demand is expected to decelerate at 3-4 percent in 2014 after construction activities were put on hold and the government delayed infrastructure spending as protests aimed at toppling Prime Minister Yingluck Shinawatra escalate.

A decline in domestic demand for energy as a result of the protests is also clouding the outlook for PTT Exploration and Production Pcl, Thailand's biggest oil and gas exploration firm, analysts say. The company reported a steeper-than-expected 47 percent drop in its fourth-quarter net profit on Thursday, largely due to the weaker baht and higher operating expenses.

To help offset the effect of the unrest, Siam Cement's CEO Kan said his company was committed to expanding in Southeast Asia this year, where he forecast sales for petrochemicals, cement and building materials to grow by between 14 and 15 percent.

Siam Cement's 8.2 billion baht net profit for the October-December quarter is 16 percent lower than the previous quarter due to seasonal weakness in cement and building material sectors, the company said.

Siam Cement is 30 percent owned by the Thai royal family's Crown Property Bureau investment arm. It competes with Swiss Holcim Ltd.

Its shares, valued at $16 billion, have fallen 7.4 percent over the past three months, versus a 12 percent drop on the broad index. The stock erased earlier loss and was unchanged at 402 baht at 0855 GMT. ($1 = 32.8900 Thai baht) (Additional reporting by Pisit Changplayngam in BANGKOK and Seng Li Peng in SINGAPORE; Editing by Miral Fahmy)

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