Vision: ASEAN Sustainable Business Leader Strategies: 1

Member of DJSI
Industry Leader (Construction Materials)
2014 / 2013 / 2012 / 2011
Vision: ASEAN Sustainable Business Leader
Strategies: 1. ASEAN Expansion
2. High Value Added products & services (HVA)
CLSA conference - Hong Kong
Sep 16-17, 2014
Agenda
Page 2

Key Points & Strategies

Business Updates

Sustainability & People

Financials

Appendix
Latest updates
Page 3
Cement – Building Materials:
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Global Int’l: 50% stake in regional construction-related retail with Siam Global House (190 MB)
Mortar: 2 MT capacity expansion (Lampang and Khon Kaen (2,800 MB) – H1/16 start
Woodchip Cement Board: acquired a 55% stake in Panel World, with cap of 2.4 Mill sqm. (550 MB)
Cement plants: (Laos, Myanmar, Indo, Cambodia) 6.3 MT (39,000 MB - $1,300 M) – Q2/15 - Q2/17 starts.
Ceramic (Italy): 33% stake, 5 Mill sqm. (506 MB) - H1/15 start
Ceramic Tiles (Vietnam): 85% stake M&A, 75 Mill sqm. (7,200 MB or $240 M).
Precast concrete: two precast plants totaling 2.4 Mill sqm (2,500 MB or $80 M) – Q1/15 start
Sanitary ware and fitting assets: for majority stake (2,600 MB or $90 M).
MG Stone Slabs: 400,000 sqm. green-field (1,500 MB or $50 M) – Q2/15 start.
Chemicals:



Increase stake in BST: from 26% to 49% (8,028 MB or $260 M).
Debottleneck of Chandra Asri (Indonesia): Ethylene capacity gained up 43% - H2/15 start
LDPE coating grade (HVA) of 60,000 tons, totaling 152,000 tons per year, by mid-2016 in Thailand.
Paper:
Fibrous chain:
 Glassine paper (HVA): 1,825 MB , 60,000 tons – Q2/16 start
 Nippon paper’s 30% stake in SCG Paper’s Fibrous chain.
Packaging chain:
 Flexible Packaging (HVA): acquisition of a 22% in Prepack of 14,000 tons (340MB)
 Box plant - Indonesia: 90% stake M&A, 37,000 tons (395 MB or $13 M).
- Thailand: 75% stake M&A, 121,000 tons (888 MB or $30 M)
 Packaging paper in Thailand: 400,000 tons brown-field (6,700 MB or $220 M).- Q4/14 start
ASEAN portfolio H1/14
Page 4
Expansion into ASEAN
Page 5
Cement and Building Materials:
 New cement plants in ASEAN.
 Acquire building materials assets.
Majority of the CAPEX & Investment
Chemicals:
 Flexible feedstock cracker (Vietnam chemicals complex).
 Debottleneck of Chandra Asri (Indonesia cracker).
Paper:
 Gear towards packaging solution.
 Improve productivity in the fibrous chain.
R&D and Product DesignTeam
Budgeted R&D spending of 4,000 MB for FY2014.
Page 6
R&D Spending
R&D Product and Design Team
(staffs / Jul/14)
364 (Ph.D. 9)
2007
1,349 (Ph.D. 81)
Jul/14
HVA Strategy
(High value added products and services)
Page 7
HVA attributes:
5-10% higher margin
Performance
Service & Design
Branding
HVA’s Revenue from Sales
Solutions provider
HVA Strategy Examples
Page 8
Cement-Building Materials
“ Color rendered mortar”
“Large format ceramics”
“Roofing solution”
HVA Strategy Examples
Page 9
Chemicals
“ EU-certified PE water pipe”
“ Medical grade plastic”
“ Automotive Cluster”
“Wire & Cable”
“Roto molding”
HVA Strategy Examples
Page 10
Packaging & Paper
“ Lightweight packaging solution”
“Less paper-Same strength”
“Up to 25% lighter”
“Flexible Packaging”
“Glassine paper”
Agenda
Page 11

Key Points & Strategies

Business Updates

Sustainability & People

Financials

Appendix
Net profit segments
Page 12
FY2013
36,719 (+56% y-o-y)
H1/13
18,720 MB
Other = Mainly SCG Investment and Corporate
H1/14
16,913 MB (-10% y-o-y)
Cement – ASEAN presence
Thai domestic market share of 40%
Page 13
EXISTING:
Laos 1.8 MT
Myanmar 1.8 MT
Thailand
Cambodia
Vietnam
23
1
0.2
MT
MT
MT
Thailand 23 MT
Vietnam 0.2 MT
Cambodia 1.0 MT + 0.9 MT
Indonesia 1.8 MT
NEW PLANTS:
Cambodia
Indonesia
Myanmar
Laos
0.9
1.8
1.8
1.8
6.3
MT
MT
MT
MT
MT
Start
Q2/15
Q3/15
Q2/16
Q2/17
Domestic cement industry
Page 14
Thai cement market – all players
MT
60
Capacity 56MT
+85-90%
utilization
50
40
Domestic
30
20
Export
10
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014e
Total Domestic Growth Rate (% y-o-y)
-
10% -45% 15% -8% -1% 23% 6% 11% 9%
-2% -6%
-6%
1% 10%
3%
12% 7%
0%
Domestic cement segments
80% provincial : 20% Bkk vicinity
Page 15
by volume
% growth y-o-y
FY2013
Q1/14
Q2/14
Q3/14e
Total Market
7%
4%
0%
-3%
Commercial
Retail
20%
14%
9%
-
Gov’t
28-30%
Gov’t
3%
1%
-1%
-
Residential
50-52%
Residential
6%
1%
1%
-
100%
Commercial
Retail
18-20%
Domestic cement price
Prices in Q2/14 were flat in the 1,950 – 2,000 Bt/ton range ($62/ton).
Page 16
Average Domestic Price of Grey Cement (Net ex-factory)
SCG’s Cement exports
Export prices are FOB.
Page 17
MT
$/ton
35.0
70.0
Export Prices (FOB)
57
30.0
59
58
60.0
52
25.0
40
20.0
34
15.0
22
24
10.0
5.0
50.0
45
4.7
6.0
22
21
7.1
7.6
24
6.2
35
38
41
40.0
34
27
6.1
Export Volume (MT)
6.8
7.0
8.1
8.2
7.6
7.3
30.0
20.0
6.4
5.7
4.0
10.0
1.3
1.2
0.0
0.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Q1/14 Q2/14
Bagged cement % : 11% 17% 31% 30% 42% 61% 69% 66%
Historical margin: HDPE – Naphtha
Page 18
$/ton
1,000
900
800
700
US crisis
Asian crisis
600
EU crisis
500
400
300
200
Trough
$300/ton
Trough
$400/ton
100
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Global ethylene incremental supply growth
Page 19
%
10
9
8
7
6
5
4
3
2
1
0
“Flood of supply”
8%
5%
4%
4%
4%
4%
4%
3%
3%
3%
3%
3%
2%
1%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
10.5
6.9
2.0
5.0
4-5
4-5
3-4
7-10
Incremental supply growth (MT):
2.8
4.4
4.6
4.7
4.7
3.5
HDPE – Naphtha Price Gap
Page 20
Note: Prices refer to SEA regional prices
PP – Naphtha Price Gap
Page 21
Note: Prices refer to SEA regional prices
Price Gaps of Associates
Page 22
Note: BD and MMA prices refer to SEA regional prices , PTA prices refer to Asian regional prices
SCG Paper: product portfolio
Page 23
Packaging Chain
H1/14 EBITDA
- Rengo’s 30% stake in all corrugated box businesses
and Vietnam’s packaging paper operations.
Internal
Corrugated Box
(5,358 MB)
1.0 MT
Packaging chain
77%
2.3 MT
Fibrous chain
23%
Fibrous Chain
External
Containerboard
Paperboard
- Nippon Paper’s stake of 30%
P&W Paper
570 KT
18% EBITDA
12% EBITDA
Margin
Margin
Internal Eucalyptus Pulp
470 KT
Dissolving
Grade Pulp
96 KT
SCG Paper: growth strategies
Page 24
Packaging Chain
“Growing Packaging Business in ASEAN”
 Regional / Geographical Growth (Targets: Vietnam and Indonesia)
 Growing thru HVA Products / Services (such as High Performance Paper and Packaging)
Primary Packaging
•
•
•
Product protection
Marketing tools
Flexible packaging,
rigid, glass, or metal
Tertiary Packaging
Secondary Packaging
•
•
•
Marketing tools
Information
Mainly paper-based
packaging; folding
carton
•
•
•
Logistics /
transportation
Handling / inventory
management
Corrugated container
Other Packaging
•
•
Logistic support
Retail packaging
Agenda
Page 25

Key Points & Strategies

Business Updates

Sustainability & People

Financials

Appendix
Systematic training roadmap
Page 26
.
*
*
*
* = international
programs
*
*
External training programs
Page 27
Program
Current
Since
Classes
Staffs
AMP – Advanced Management Program
Harvard
Wharton
1982
2007
32
7
81
14
EDP – Executive Development Program
IMD
Columbia
2014
2007
1
4
45
177
MDP – Management Development Program
Wharton
Duke
1980
2011
30
4
1,418
225
Kellogg
2006
9
615
Marketing Excellence Program
as of Aug/14
Corporate scholarship program
Total 489 scholarships granted since 1973
Page 28
MBA
Engineering and Specialist
295 graduates are working with the company
Current 75 students (72 overseas): MBA 17, Engineering 42, Specialist 16
As of Aug/14
DJSI: Dow Jones Sustainability Indices
Page 29
2014 / 2013 / 2012 / 2011 : Industry Leader
(Construction Materials)
Member of DJSI
ranked by
2014-2008
: ranked “Gold Class” which is top group for each sector.
2004
: initial year of DJSI membership.
 DJSI was established in 1999 as the first global
index to monitor sustainability of listed companies.
 +60 global funds in 16 countries follow the DJSI.
 For further details: www.sustainability-index.com
2013 DJSI sector overview
Construction Materials
Page 30
Source: http://www.sustainability-indices.com
Agenda
Page 31

Key Points & Strategies

Business Updates

Sustainability & People

Financials

Appendix
Net debt
Internal leverage target of 2.5 times (Net debt / EBITDA)
Page 32
Debt profile:
• Net Debt / EBITDA = 2.6x
• Net Debt / Equity = 0.9x
• 98% are Thai Baht
• 93% are fixed
• Interest cost of 4.0%
• Cash on hand of 33,400 MB
CAPEX & Investments
Page 33
2014 CAPEX range
of 40-50 Bill Baht
- CAPEX includes debottlenecking, expansion projects, and major turnaround.
- Investments are acquisitions and purchase of shares.
Annual dividend
Payout policy of 40-50%.
Page 34
Note: Dividend policy established in 2008

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