SCGP Announces Strong Q2 Profits of Baht 1,485 million, with Focus on Consumer Packaging Solution Offerings and Efficient Cost Management; Continues Business Expansion in ASEAN Amid Ongoing Demand Recovery

SCGP announced its Q2/2023 operating results, with revenues of Baht 32,216 million, a decrease of 4% compared to the previous quarter. Efficient cost management and the focus on strategic development of packaging that cater to consumer needs led to a robust net profit of Baht 1,485 million, a 22% increase from the previous quarter. This growth is evident, particularly in the food and beverage sectors, which continue to recover from the economic impact in ASEAN countries, driven by the increasing exports of frozen food, canned food, and fruits to China. With overall trend of continuous growth in packaging industry in the second half of the year, strategic investments are targeted in ASEAN, especially in high-potential countries like Vietnam and Indonesia. At the same time, SCGP develops world-class innovations as ‘Bio-based Plastic from Eucalyptus Woodchips’ and ‘Wooden Foodservice Packaging from Eucalyptus Wood’, to support the use of renewable resources to strengthen the economy and promote environmental sustainability.

Wichan Jitpukdee, Chief Executive Officer of SCG Packaging Public Company Limited or SCGP, said that the company recorded increase in profit for Q2/2023, despite the slowdown in sales from previous quarter which was mainly due to lower revenue in the integrated packaging business with slowdown of packaging paper demand in the Indonesian market amid extended public holidays in the past quarter. Revenue from Sales was Baht 32,216 million, a decrease of 4% q-o-q. EBITDA stood at Baht 4,681 million, an increase of 5% q-o-q, and Profit for the Period was Baht 1,485 million, an increase of 22% q-o-q.

The growth in net profit for Q2/2023 was due to the continuation of effective cost management strategy, which includes managing and improving production efficiency in various countries, expediting synergy and optimization with cross-selling, pool-purchasing, and production rationalization across regional operations. Support is also from the decrease in raw material and energy and freight costs. Furthermore, products portfolio has also been adjusted to align with market conditions, for example the increased production and sales of dissolving pulp, which pose higher relative selling price, to meet the increasing demand in textile and apparel industry.

As the overall demand for consumer packaging in ASEAN continues to recover, there has been notable increase in demand for food and beverage, frozen food, canned food, along with export of large quantities of fruits to China. Additionally, there was also increase in printing and  writing paper sales during the new academic year and Thai election. However, challenges persist from the volatile global economy, inflationary pressures, rising interest rates, and contracted consumer spending, leading to a slowdown in exports of durable and non-essential goods.

On July 25, 2023, the Board of Directors approved an interim dividend payment from the first half of 2023 at the rate of 0.25 Baht per share, totaling Baht 1,073 million, which is payable on 22 August 2023. The XD date is set for August 8, 2023, and record date on August 9, 2023.

SCGP poses solid balance sheet and capital structure that support the continuous growth of business. The company set a CAPEX target of Baht 18,000 million for  year 2023 including merger and partnership (M&P) budget of approximately Baht 9,000 million. In preparation for potential CAPEX investment in 2024 for the additional share acquisition in PT Fajar Surya Wisesa Tbk. (Fajar), SCGP has recorded Baht 23,204 million in balance sheet (current liability & other equity) in Q2/2023. The amount is associated with potential acquisition of 44.48% shares in Fajar from SCGP’s partner with possible transaction in the middle of 2024.

Wichan stated that the overall packaging industry trend in ASEAN is expected to continue its recovery in the second half of the year, driven by domestic consumption, tourism, and the incremental use of packaging in preparation for the year-end festivities. However, global economic situation and other external factors, particularly the export flow from ASEAN to Europe where consumer spending continues to slow down, need to be monitored. Energy cost is expected to remain at relatively low level prior to winter season, while raw material cost from recovered paper is on sideway trend.

Furthermore, the company is committed to quality growth by advancing its strategy to expand the consumer packaging business in ASEAN, which continues to perform well and serves as a strong foundation for business resiliency for SCGP, especially in Vietnam and Indonesia where there are high growth potential. SCGP is expected to complete the M&P in Starprint Vietnam JSC (SPV) in late 3rd quarter of 2023. This transaction would accommodate the continuously increasing consumption of folding cartons and rigid boxes in Vietnam while also enable synergy among other subsidiaries of SCGP in the country.

At the same time, SCGP has been investing in the development of innovations and solutions to meet evolving consumer needs. The company is in collaboration with Origin Materials, in the process of developing Bio-based Plastic from Eucalyptus Woodchips, with successful laboratory test and production optimization stages. The next step is to heading toward the pilot plant scale along with related partnership selection for further technology development. In addition, SCGP is also researching and developing Wooden Foodservice Packaging to support the use of renewable resources. This meets the trend of environmentally friendly foodservice packaging that is biodegradable  while adds value to eucalyptus wood, an economic plant in ASEAN. The project also creates value for stakeholders from the planting to processing of eucalyptus wood, contributing to the creation of sustainable income and environment.

SCGP continues to align its business operations with the ESG 4 Plus, which has, in turn, helped the company earn recognition in the industry. Most recently, Sustainalytics evaluated SCGP’s ESG Risk Ratings and placed it at a low-risk level within the Container & Packaging industry group.

Published on: Jul 27, 2023

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