SCG cuts non-core activities (Thai)

The current economic slump differs from the 1997 crisis in many aspects. But for Siam Cement Group (SCG), the country's largest industrial conglomerate, it is necessary to revert to a similar strategy: focus on fundamentals and beef up efficiency.

Kan Trakulhoon, the SCG president and chief executive officer, said the group had revised its five-year business plan to shelve investment in peripheral businesses to consolidate its financial position. Its strategy now focuses on efficiency measures in cost control and inventory management.

In his view, the current crisis is even more precarious than a decade ago, particularly in light of the fallout from the closure closure of Bangkok's airports by anti-government protesters under the People's Alliance for Democracy.

''If the damage from 1997 stood at 100, the situation now could equal 200. We need to get ourselves ready,'' Mr Kan said.

SCG is no stranger to cost-cutting and restructuring. The group undertook a massive restructuring during the economic crisis, as the sharp depreciation of the baht caused its external debt to double to 240 billion baht even as earnings fell sharply.

The crisis prompted SCG to divest 57 of 140 subsidiaries classified as non-core assets. The companies sold had owed more than half of the group's total foreign debt.

SCG has cut its current five-year investment plan, originally projected at 120 billion baht, to 80 billion and could slash more.

''Our priority is balance sheet health over growth. We are postponing new capital expenditures. We are preserving liquidity and have an efficient cash plan,'' Mr Kan said.

SCG's external debt stood at just 3% of its total of 130 billion as of Sept 30. Exports now contribute one-third of total sales. SCG has reduced its US market share from 20% to 2% of exports, and sales to Europe from 10% to 8%. Asean markets now account for half of its exports and Africa's share is rising.

SCG will increase its research and development budget to one billion baht in 2009 from 800 million this year, a dramatic rise from just 70 million in 2005. The aim is to lift high-value products to 15% of sales from 7%.

It is also stepping up recruitment of top graduates and doctorate holders.

''We have a vision to be a sustainable leader in Asean in terms of society, environment and communities. We must continue to react to changes in customer demand,'' Mr Kan said.

SCG also plans to invest 10 billion baht in a project to promote efficient use of energy. ''Oil prices are unlikely to stay at $50 per barrel for long. New crude sources cost $75-80 [to develop] while oil sands cost $65,'' he said.

Siam Cement shares (SCC) closed on Thursday on the Stock Exchange of Thailand at 89 baht, down one baht, in trade worth 73 million baht.


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