SCG Focusing on Cost Reduction, Sustainable Growth and Strategic Investments

SCG announced its quarter (Q) 3 and year-to-date results for the first nine months of 2024, addressing ongoing economic challenges. The company is focused on achieving key objectives, including reducing overall organizational costs by VND3.57 trillion (US$144 million) by 2025, lowering working capital by VND7.14 trillion (US$287 million) by Q1/2025, and discontinuing unprofitable businesses. In addition, SCG is executing asset divestments to enhance operational agility and strengthen its financial position.

As part of its long-term strategy, SCG is increasing flexibility in its petrochemical operations in Vietnam by investing an additional US$700 million to enable the use of ethane, thereby reducing raw material costs. This project is expected to be completed by 2027. SCG is also accelerating the development and export of low carbon cement and high-demand green polymers. The ASEAN market continues to grow, strengthening in line with the Inclusive Green Growth approach. SCG is preparing to navigate escalating conflicts, heightened global economic volatility, a prolonged global petrochemical downturn that is lasting longer than expected, and fluctuations in the Thai baht.

Thammasak Sethaudom, President and CEO of SCG, said, "For the period of the first nine months of 2024, SCG achieved revenue of VND266.13 trillion (US$10.66 billion), close to the previous year, driven by sales volumes from SCG Chemicals and SCGP. Earnings before interest, taxes, depreciation and amortization (EBITDA), including dividends received from associates, amounted to VND27.1 trillion (US$1.09 billion), a decrease of 10% compared to the same period last year. Profit for the period was VND4.79 trillion (US$192 million), down 75% from the same period last year due to operational expenses for the Long Son Petrochemicals (LSP) project, reduced chemical product price spreads, and a decrease in the share of profits from associates. Excluding extraordinary items, profit decreased by 46% compared to the same period last year. In Q3/2024, revenue was VND91.57 trillion (US$3.68 billion), with EBITDA at VND7.06 trillion (US$284 million). Profit stood at VND515 billion (US$21 million), down 81% from the previous quarter, which was attributed to the foreign exchange effect from the Baht appreciation, the downward chemicals inventory price adjustment, decreased equity income from associate companies, and seasonal dividend."

SCG expected its revenue for 2024 to increase by 3% from the previous year, despite severe global economic volatility, a prolonged global petrochemical downturn, the Middle East conflict, increased competition from Chinese products in the domestic market, and fluctuations in the Thai baht. These challenges pose obstacles to business operations and are likely to persist for an extended period. As a result, SCG is adopting a more cautious and prudent approach in conducting its business, with a clear focus on enhancing operational efficiency and financial stability. The company has outlined several key objectives, including reducing overall organizational costs by VND3.57 trillion (US$144 million) by 2025, lowering working capital by VND7.14 trillion (US$287 million) by Q1/2025, and discontinuing unprofitable businesses, such as SCG Express and the digital technology venture OITOLABS in India. Additional operations are under review for potential discontinuation, while asset divestments are being executed to boost agility and maintain financial strength.

To improve production efficiency and sustain competitive EBITDA levels, SCG is focusing on strategic initiatives, including increasing alternative fuel usage in its Thai cement plants to 50% by the end of this year, and implementing automation in tile production to improve precision and speed, and reduce material waste. Despite these cost-saving and efficiency measures, SCG remains committed to its long-term growth strategy, continuing to invest in ASEAN countries. Over the past nine months, the company has seen a 10% year-on-year sales growth, primarily driven by strong performance in Vietnam and Indonesia.

In the long term, green initiatives and Inclusive Green Growth approach present business opportunities and advantages. Therefore, the company is accelerating investment in the ethane project at Long Son Petrochemicals (LSP) to reduce raw material costs, with an investment budget of US$700 million. This move enhances competitiveness within the global petrochemical industry and helps reduce carbon dioxide emissions in the production process. SCG is also promoting high-value green innovations such as Generation 2 Low Carbon Cement, which has been continuously well-received, achieving an 86% replacement rate of conventional cement with Low Carbon Cement. Additionally, the company is advancing green polymers under the SCGC GREEN POLYMER™ brand which shows consistent growth.

For SCG’s operation in ASEAN (ex-Thailand), the revenue from sales in the first nine months of 2024 recorded a 13% y-o-y increase, amounting to VND50.71 trillion (US$2.03 billion). This growth was primarily driven by improved market conditions in regional operations, particularly in Vietnam and Indonesia. This contributed 19% of SCG’s total revenue from sales. This figure includes sales from both local operations in each ASEAN market and imports from Thai operations.

As of 30 September 2024, SCG’s total assets amounted to VND660.86 trillion (US$26.88 billion). Of these, the total assets of SCG in ASEAN (ex-Thailand) were VND294.71 trillion (US$11.99 billion), or 45% of SCG’s total consolidated assets.

For SCG in Vietnam, the company reported revenue from sales of VND25.67 trillion (US$1.03 billion) for the first nine months of 2024, representing a 17% year-on-year increase. This growth was primarily driven by the increased sales from SCG Chemicals (SCGC).

In addition to promoting sustainable economic growth for Vietnam, SCG is dedicated to environmental, social and governance (ESG) initiatives, in line with its business purpose of “Inclusive Green Growth”. SCG Color Roof has become Vietnam’s first concrete roof company to achieve the Singapore Green Label. To be certified as a green product, SCG Color Roof underwent a rigorous testing and assessment process to meet stringent criteria related to product quality, health, environmental impact and product life cycle. This recognition highlights SCG’s commitment to ensuring the highest standards of quality while fulfilling its environmental responsibilities for customers’ benefits. SCG also empowers youth through the Packaging Speak Out 2024 competition by SCGP which has officially launched in Vietnam for the third year. In collaboration with the Ho Chi Minh City Student Assistant Center (SAC), this year’s innovative competition encourages young Vietnamese designers to create cutting-edge and sustainable packaging solutions under the theme “Packaging for a Brighter Tomorrow”.

In terms of reducing social inequality, SCG’s efforts included the 17th SCG Sharing the Dream project, which awarded 100 scholarships in Vietnam worth VND1.5 billion (approximately US$59,000), and the Learn to Earn project, which provided opportunities for young people to secure better jobs. The company also supplied clean water to the community in Quang Nam through the Loving Water for the Future project and donated VND2.1 billion (US$82,700) to the communities affected by Typhoon Yagi. Through these initiatives, SCG underscores its commitment to sustainable development and community uplift in Vietnam.

By Van Luong, Vietnam Business Forum