Siam Cement Public : Management Discussion and Analysis Quarter 2/2022 (Reviewed)

Q2/22 earnings of 9,937 MB, +12% q-o-q

The Siam Cement Public Company Limited

Management's Discussion and Analysis (MD&A)

Consolidated Financial Results: Q2/22 and H1/22

Consolidated Financial Performance

SCG reported Q2/22 Revenue from Sales of 152,534 MB, which was flat q-o-q. By business segments, sales revenue slightly increased q-o-q at Cement-Building Materials and Packaging businesses, while Chemicals' sales revenue slightly dropped q-o-q from a decline in sales volume as a result of planned polyolefin maintenance and softer demand in Q2/22. EBITDA registered at 24,846 MB, increased +41% q-o-q from seasonal dividend. Similarly, Profit for the Period reported at 9,937 MB, rose +12% q-o-q mainly contributed by seasonal dividend income from the investment business (automotive business).

On a y-o-y basis, SCG reported Q2/22 Revenue from Sales increased +14% y-o-y from higher sales across all businesses driven by higher product prices in-line with the market. EBITDA declined -22%y-o-y. Profit for the Period dropped -42%y-o-y largely attributable to higher feedstock cost and lower equity income at Chemicals business.

For the period of H1/22, Revenue from Sales increased +19% y-o-y to 305,028 MB due to higher sales revenue across all businesses driven by higher product prices in-line with the market. As a result of higher feedstock cost following higher oil prices, lower equity income, and the absence of winter freeze's supply shortage in the United States this year at Chemicals business, EBITDA dropped -24%y-o-y to 42,468 MB and Profit for the Period registered at 18,781 MB, a decline of -41%y-o-y.

Packaging business reported H1/22 Revenue from Sales of 74,616 MB, an increase of +31% y-o-y. EBITDA registered at 10,368 MB, decreased -4%y-o-y and Profit for the Period reported at 3,514 MB, decreased -20%y-o-y.

Table 1 - Consolidated financial summary
		Q2/22	% Change	% Change	H1/22	% Change
		MB	Y-o-Y	Q-o-Q	MB	Y-o-Y
Revenue from Sales	152,534	14%	0%	305,028	19%
Profit for the Period	9,937	-42%	12%	18,781	-41%
EBITDA	24,846	-22%	41%	42,468	-24%
EBITDA from Operations	17,158	-35%	5%	33,530	-33%
Earnings per Share (Baht)	8.3	-42%	12%	15.7	-41%
Dividend Summary		H1/22	H1/21	FY2021
Baht Per Share	6.0	8.5	18.5
Payout Ratio (% of Net Profit)	38%	32%	47%
Note : EBITDA	= Earnings and dividends, before interest, tax, depreciation & amortization.
EBITDA from Operations	= Earnings before interest, tax, depreciation & amortization.
Profit for the Period	= Profit for the period attributable to owners of the Company.

Equity Income registered at 6,768 MB in H1/22, decreased 4,637 MB y-o-y

Equity Income in H1/22 registered at 6,768 MB, decreased 4,637 MB or -41%y-o-y. The chemicals portion accounted for 44% of the total equity income, or 2,997 MB, decreased 4,517 MB y-o-y. The non-chemicals portion accounted for the remaining 56% or 3,771 MB, decreased 120 MB.

Total dividends received in H1/22 amounted to 12,076 MB, an increase of +64% y-o-y or 4,730 MB, with details as followed: a) 8,938 MB from "Associated" companies (20%-50% stake), and b) 3,138 MB from "Other" companies (less than 20% stake).

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Cash & Cash Under

Management of

69,389 MB

6.0 Bt/Sh Interim dividend

Continued solid financials, with cash & cash under management of 69,389 MB, compared to 81,677 MB in Q1/22.

Net Working Capital registered at 115,236 MB, an increase of +8% q-o-q, while Inventory turnover period was 60 days, compared to 58 days in the previous quarter (Q1/22).

The Board of Directors of SCG has approved a H1/22 interim dividend payment of

6.0 Bt/Sh (7,200 MB), which is payable on Aug 26/22 (XD-date on Aug 10/22, and record date on Aug 11/22).

Table 2 - Segments

	Q2/22	Change	Change	H1/22	Change
Revenue from Sales	MB	% Y-o-Y	% Q-o-Q	MB	% Y-o-Y
Consolidated SCG	152,534	14%	0%	305,028	19%
Cement-Building Materials Business	52,881	14%	4%	103,771	12%
Chemicals Business	66,789	10%	-3%	135,951	21%
Packaging Business	37,982	27%	4%	74,616	31%
Others	246	669%	9%	471	583%
EBITDA	Q2/22	% Y-o-Y	% Q-o-Q	H1/22	% Y-o-Y
Consolidated SCG	24,846	-22%	41%	42,468	-24%
Cement-Building Materials Business	5,668	-13%	-4%	11,561	-12%
Chemicals Business	9,973	-36%	69%	15,875	-40%
Packaging Business	5,478	-2%	12%	10,368	-4%
Others	5,138	15%	385%	6,197	15%
EBITDA from Operations	Q2/22	% Y-o-Y	% Q-o-Q	H1/22	% Y-o-Y
Consolidated SCG	17,158	-35%	5%	33,530	-33%
Cement-Building Materials Business	5,188	-17%	-12%	11,081	-13%
Chemicals Business	4,352	-65%	-7%	9,007	-61%
Packaging Business	5,478	-2%	12%	10,365	-4%
Others	3,551	55%	235%	4,610	44%
EBITDA Margins (%)	Q2/22	Q2/21	Q1/22	H1/22	H1/21
Consolidated SCG	11%	20%	11%	11%	20%
Cement-Building Materials Business	10%	13%	12%	11%	14%
Chemicals Business	7%	20%	7%	7%	21%
Packaging Business	14%	19%	13%	14%	19%
Profit for the Period	Q2/22	% Y-o-Y	% Q-o-Q	H1/22	% Y-o-Y
Consolidated SCG	9,937	-42%	12%	18,781	-41%
Cement-Building Materials Business	1,668	-32%	-28%	3,976	-25%
Chemicals Business	3,704	-64%	3%	7,292	-62%
Packaging Business	1,856	-18%	12%	3,514	-20%
Others	4,306	61%	141%	6,090	38%

Note: EBITDA	= Earnings and dividends, before interest, tax, depreciation & amortization.
EBITDA from Operations	= Earnings before interest, tax, depreciation & amortization.
EBITDA Margins	= Operating EBITDA, to Revenue from Sales.
Profit for the Period	= Profit for the period attributable to owners of the Company.

Consolidated SCG's financial statement is presented after the intersegment elimination.

Cement-Building Materials Business

Sales increased 4% q-o-q and 14% y-o-y resulting from product price adjustment to reflect cost increase

Business Segments

In Q2/22, Thailand's total domestic grey cement demand was lower at -7%y-o-y largely attributable to inflationary environment, lower purchasing power, and dampened economic sentiment. Cement demand from the government sector (accounting for 40% of total demand volume) decreased -6%y-o-y, and that of residential and commercial sectors (accounting for 60% of total demand volume) dropped -7%y-o-y and -6%y-o-y respectively. Meanwhile, the average grey cement price in Q2/22 was raised to the average of 1,850 - 1,950 Bt/ton.

In terms of Non-cement products in Q2/22, housing products (applications for roof and ceiling & wall) still experienced demand contraction of -2%y-o-y while the demand for ceramic tiles registered a positive growth of +1% y-o-y thanks to demand for renovation projects.

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Chemicals Business

Normalized EBITDA from Operations (excluding stock adjustment and non-recurring items) improved q-o-q

Higher seasonal dividend from associates y-o-y

Net Debt

Registered at

258,306 MB in Q2/22, an increase of

19,518 MB from Q1/22

CAPEX & Investment

22,445 MB in H1/22

For SCG ceramic tiles business (floor and wall tiles), total sales volume in ASEAN markets (Thailand, Vietnam, Indonesia, Philippines) in Q2/22 registered at 46 million sqm., representing an increase of +12% y-o-y. The average price of ceramic tiles for all of SCG's ASEAN operations increased +9% y-o-y.

In Q2/22, Revenue from Sales of the Cement-Building Materials Business registered at 52,881 MB, increased +14% y-o-y thanks to commercial strategy which lead to higher sales in both domestic and regional markets. This helped to compensate for demand weakness affecting sales volume during the quarter. EBITDA registered at 5,668 MB, decreased -13%y-o-y. Profit for the Period registered at 1,668 MB, a drop of -32%y-o-y due mainly to higher energy and raw material cost, as well as demand weakness.

In H1/22, Revenue from sales registered at 103,771 MB or +12% y-o-y. EBITDA was 11,561 MB or -12%y-o-y and Profit for the period registered at 3,976 MB or -25%y-o-y.

In Q2/22, volatility continued as Brent crude oil price increased by $15/bbl to $112/bbl, while Naphtha price decreased by $2/ton or -0.2%q-o-q to $875/ton. Crude oil price increased due to prolonged Russia-Ukraine conflict and supply outages amid demand recovery while Naphtha price was pressured from crackers cut run.

In the Olefins chain in Q2/22, the average HDPE price increased $13/ton or +1% q-o-q to $1,343/ton as higher feedstock cost. Average HDPE-Naphtha spread increased by $15/ton or +3% q-o-q to $468/ton from product price uptrend. Average PP price decreased $35/ton or -3%q-o-q to $1,321/ton, and average. PP-Naphtha spread dropped by $34/ton or -7%q-o-q to $445/ton according to additional supply of new capacities and weaker domestic demand in China amid high feed cost. In Q2/22, Chemicals business sold 426,000 tons of polyolefin products (PE and PP), dropped -14%q-o-q and -13%y-o-y. In H1/22, sales volume decreased to 922,000 tons or -6%y-o-y.

In the Vinyl chain in Q2/22, the average PVC-EDC/C2 spread rose by $153/ton or +41% q-o-q to $530/ton due to demand recovery from construction activities and PVC maintenances in Asia. In Q2/22, PVC sales volume decreased by 27,000 tons or -12%q-o-q to 196,000 tons from planned maintenance and plant turnaround. In H1/22, sales volume rose to 419,000 tons or +1% y-o-y.

In Q2/22, Revenue from Sales was 66,789 MB, increased +10% y-o-y due to higher product prices despite lower sales volume while dropped -3%q-o-q. EBITDA increased +69% q-o-q from seasonal dividend and decreased -36%y-o-y to 9,973 MB as higher feedstock cost. EBITDA from Operations decreased to 4,352 MB or -7%q-o-q and -65%y-o-y. Profit for the Period increased to 3,704 MB or +3% q-o-q and decreased -64%y-o-y due to rising feedstock cost. This was supported by a non-recurring gain of 978 MB in Q2/22, which was from the sale of land. Equity income from associates was 1,440 MB, dropped -8%q-o-q and -63%y-o-y due to higher feedstock cost and soft demand from the consumer sector in general. In Q2/22, Chemicals business realized inventory loss of 1,040 MB.

In H1/22, revenue from sales was 135,951 MB, increasing +21% y-o-y from higher product prices. EBITDA decreased -40%y-o-y to 15,875 MB and EBITDA from Operations was 9,007 MB or decreased -61%y-o-y from lower product spreads. Profit for H1/22 was 7,292 MB or decreased -62%y-o-y from higher feedstock cost and lower equity income.

Financials

Net debt registered at 258,306 MB in Q2/22, an increase of 19,518 MB from Q1/22. Relative to the 12-month trailing EBITDA, Q2/22's the Net Debt / EBITDA ratio stood at

3.3 times (x) compared to 2.8 times (x) in Q1/22. Net Debt / EBITDA (not including project CAPEX under construction) ratio slightly increased to 1.5 times.

Net finance and interest cost in H1/22 amounted to 3,362 MB compared to 3,385 MB in H1/21 and 6,758 MB in FY2021. This corresponded to the average cost of interest in H1/22 which was 2.6%, lower than 2.8% in H1/21 and 2.7% in FY2021. Amid rising interest rates environment, approximately 3/4 of long-term loan has fixed rates, and work is ongoing to convert additional floating portion into fixed.

CAPEX & Investment in H1/22 amounted to 22,445 MB, of which 58% was from Chemicals, 23% was from Cement-Building Materials, 14% was from Packaging, and 5% was from others. The spending was mainly due to on-progress construction of

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Long Son Petrochemicals Complex. CAPEX & Investment in FY2022 is expected to be 70,000 MB, decreased from previous estimate due to prioritization of investment projects.

The H1/22 EBITDA generation of 42,468 MB compares to the cash outflow of 44,762 MB (CAPEX & Investments of 22,445 MB, dividend payment of 13,932 MB, interest payment of 4,377 MB and corporate tax of 4,008 MB).

Table 3 - SCG's Debt Profile (MB)	Q2/22	Q1/22	Q4/21	Q2/21
Short Term	62,199	56,804	39,586	33,370
Foreign	18,136	16,463	14,574	11,366
Baht	44,063	40,341	25,012	22,004
% of Total Loan	19%	18%	13%	12%
Long Term	265,496	263,661	263,528	239,405
Foreign	62,331	59,853	60,133	38,200
Baht	203,165	203,808	203,395	201,205
% of Total Loan	81%	82%	87%	88%
Total Loan	327,695	320,465	303,114	272,775
Cash & Cash Under Management	69,389	81,677	68,323	94,543
Cash and cash equivalents	44,447	59,068	35,993	39,814
Investment in short-term debt securities	22,725	21,457	31,617	48,360
Investment in debt securities (Private funds)
and fixed deposit more than 12 months	2,217	1,152	713	6,369
Total Net Debt	258,306	238,788	234,791	178,232
SCG's Financial Ratios	Q2/22	Q1/22	Q4/21	Q2/21
EBITDA on Assets (%)	9%	10%	11%	12%
EBITDA on Assets (%)
(excluding projects under construction)	11%	12%	14%	14%
Current Ratio (times)	1.4	1.3	1.4	1.3
Quick Ratio (times)	0.8	0.8	0.8	0.8
Interest Coverage (times)	14.5	10.7	12.7	18.9
Net Debt to EBITDA (times)	3.3	2.8	2.6	1.9
Net Debt to EBITDA (times)
(excluding projects under construction)	1.5	1.3	1.1	0.9
Net Debt to Equity (times)	0.6	0.5	0.5	0.4
Debt to Equity (times)	0.9	1.0	0.9	0.9
Return on Equity (%)	9%	12%	14%	15%

Note:	Net Debt	= Total debt (interest bearing), less cash and cash under management
	EBITDA	= Earnings before interest, tax, depreciation & amortization, plus dividends
	EBITDA on Assets	= Trailing-12-month EBITDA, to average Total Consolidated Assets
	Current Ratio	=	Current assets, to current liabilities
	Quick Ratio	=	Cash + short term investments + receivable, to current liabilities
	Interest Coverage	=	EBITDA, to interest expense
	Net Debt to EBITDA	= Net debt, to Trailing-12-month EBITDA
	Net Debt to Equity	= Net Debt, to equity & non-controlling interest
	Debt to Equity	= Total Liabilities, to equity & non-controlling interest
	Return on Equity	=	Trailing-12-month Net profit, to average total shareholders' equity
			(not including non-controlling interest)

Table 4 - Statement of Financial Position (MB)
	Jun/22	Dec/21	Jun/21
Total Assets	903,137	861,101	812,051
Current assets
Cash, cash equivalent and
Investments in short-term debt securities	67,172	67,610	88,174
Trade and other receivables	94,971	78,951	74,771
Inventory	86,810	83,121	68,825
Long-term investment	139,456	137,579	122,625
Property, plant and equipment	424,620	410,708	387,670

Total Liabilities	435,381	411,093	379,943
Trade and other payables	76,056	75,026	74,831
Loans	327,695	303,114	272,775
Total Shareholders' Equity	467,756	450,008	432,108
Total equity attributable to owners of the Company	383,481	365,691	351,978
Non-controlling interests	84,275	84,317	80,130

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Annualizing our H1/22 figure would land SCG's full-year 2022 GHG emissions at

1. million tons CO2 which is within full-year target of

1. million ton CO2

SCG Green Choice products accounted for 50% of total Revenues in H1/22

SCG Sustainability

With our commitment to lead change towards sustainable future for all stakeholders, SCG accelerates actions by implementing ESG 4 plus consisting of Net Zero, Go Green, Reduce Inequality and Enhance Collaboration while harnessing good governance and building Trust through Transparency. This key strategy will make SCG's business and its ecosystem resilient as well as positions the company to capture future business opportunities.

ESG Performance Update

SCG's absolute GHG emissions (scope 1+2) in H1/22 was 16.0 million ton CO2 equivalent to GHG reduction. Annualizing our H1/22 figure would land SCG's full-year 2022 GHG emissions at 32.0 million tons CO2 which is within full-year target of 32.2 million ton CO2. Compared to 33.9 million ton CO2 in 2020, accumulated GHG emissions reduction puts SCG on track to achieve our 2030 target with better progress than The Science Based Target initiatives (SBTi)'s suggested GHG emissions reduction of 2.5% per year to be within well-below 2 degrees Celsius scenario. We achieved this by increasing the use of alternative fuel such as biomass and Refuse-Derived Fuel (RDF) to substitute fossil fuel. During H1/22, SCG's use of alternative fuel accounted for 16.4% of fuel used for all business units and 31.3% for Cement business in Thailand.

With regards to Go Green, the H1/22 revenue from sales of SCG Green Choice products increased to 153,240 MB, accounting for 50% of total revenue from sales. SCG has created "SCG Green Choice" eco label to offer options to eco-conscious consumers, giving them the assurance that these certified items have lower impact on the environment while also providing a better quality of living. SCG has set a target for the sales of SCG Green Choice products to reach 2/3 of total Revenue from Sales by 2030.

SCG's water withdrawal reduction was 24.9% in H1/22

More than 4,000 workers benefited from SCG's job creating, skills enhancement, and capabilities development in H1/22

SCG joined hands to extend ESG into real implementation by hosting the ESG Symposium 2022

On water withdrawal, SCG has set the target to reduce water withdrawal by at least 23% by 2025 compared with Business-As-Usual base year of 2014. In H1/22, SCG's water withdrawal reduction surpassed our 23% target to reach 24.9%.

As part of our drive to "Reduce Inequality", more than 4,000 workers in H1/22 were supported in terms of job creation, skills enhancement, and capabilities development to match market's demand. SCG aims to empower communities and create jobs for 20,000 workers by 2025. Examples of projects we implemented include SCG Skills Development to strengthen driving skills for truck drivers; Q-Chang, the online platform for housing service and solution to promote housing maintenance jobs; SCG's Power of Community project to provide training and knowledge to empower communities for self-development and sustainable income

"Enhance Collaboration" in Thailand, Regional and Global Stage

As much as we strive to improve our own ESG standing, SCG strives to encourage domestic, regional and global collaboration to extend ESG into real implementation. We hosted the ESG Symposium 2022, a carbon-neutral event held on 19 July 2022 with the main objective of encouraging collective actions from all sectors to embrace ESG in compliance with Sustainable Development Goals (SDGs) set forth by the United Nations and with the Bio-Circular-Green Economy (BCG Economy).

More than 130,000 participants from business sector, state agencies, thought leaders, academics, media, and civil society gathered together to discuss ESG practices and make commitment towards sustainable world. In addition, dialogues and commitments made at ESG symposium 2022 will expand to collaborative networks such as the Circular Economy in Construction Industry (CECI), CEO Forum for Low-carbon Society, and Industrial Decarbonization Consortium, which emphasize the power of collaboration towards the transition to Net Zero and green economy.

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