Message from the Group Executive Committee
Mr. Aidan John Lynam
Director and Group Chief Executive Officer
2020 has been an unprecedented and tumultuous year, with the global COVID-19 pandemic impacting heavily on economic activity globally, not least in the countries and markets in which the Siam City Cement Group operates. At a consolidated Group level, we experienced an 12% drop in revenue in 2020, and deployed a swift and deep-rooted crisis management program, fully protecting the health of all our employees, whilst stabilizing our supply chains and also assuring financial liquidity.
With the pandemic as a catalyst for action, the Group has adapted organization structures and intensified internal efficiency improvements with the clear intent of emerging stronger into what has become the “new normal”.
In reacting to the rapidly unfolding economic realities of 2020, we have instigated initiatives and interventions which will sustain the Group’s wellbeing going forward. As these improvements gain traction, we are beginning to see clear margin improvements across many of our businesses leading to a net profit gain in 2020 of 17% over the previous year, in spite of the aforementioned significant drop in revenue.
However, throughout this turbulent period, we have maintained our determined focus on providing application-oriented solutions to our customers. We have also sustained our committed efforts towards environmental and social responsibility.
In Thailand, the situation at the beginning of the year was already characterized by a slowing economy, even before the pandemic-associated downturn affected local construction activity. By mid-year, this led to a further slowdown in residential building activity, whilst the long-awaited increase in infrastructure investment unfolded at a slower than expected pace. As pricing in the export market deteriorated, the Group made a fast and timely decision to suspend the operation of one of our Saraburi kiln lines to adapt our capacity to fast-changing levels of demand. Simultaneously, we launched initiatives to boost reliability across the rest of our manufacturing facilities at Saraburi and assured the availability of products for sale, both domestically and for overseas exports.
The outcome, buoyed by lower thermal energy costs, as well as cost curve adaptation across our concrete and aggregates business in Thailand, was a clear improvement in operating margins and enhanced profitability compared with the previous year.
Siam City Cement Trading Company Limited optimized its customer networks and trading activities, delivering to as wide afield as China, Taiwan, Bangladesh, and Australia, as well as to our own Group entities overseas.
Our Light Building Materials business in Thailand (and Indonesia) was impacted by the fall in residential construction and the sharp downturn in modern trade retail activity, whilst our Ecocycle subsidiary saw a reduction in industrial services projects across Thailand in the oil and gas and petrochemical spaces.
Beyond Thailand, our international operations also faced significant revenue pressures throughout 2020 as markets contracted and pricing for our products decreased. Siam City Cement (Vietnam) Limited was able to offset this via enhanced plant reliability and manufacturing efficiency, supported by lowered thermal energy costs and a substantial improvement in its waste management division’s performance.
Meanwhile our business in Sri Lanka, which had seen severe market impacts during substantial COVID-19-related lockdowns in the second quarter, also improved its overall profitability performance, and substantially increased its net income result over the previous year supported by a drop in raw material and thermal energy costs.
Similarly, our business in Bangladesh succeeded in outperforming the prior year’s bottom line by focusing on cost efficiencies, thus also partially offsetting increased government taxes on imported raw materials.
Although prices in the Cambodian market in 2020 were severely affected as the pandemic brought its construction boom to an abrupt halt, our joint venture business there substantially improved its results over the previous year, helped by lower energy prices, and the start-up of its waste management-oriented Ecocycle business.
Looking forward into the coming year, the Group is confident that the swift structural and cost efficiency measures taken in 2020 will be sustained. As and when markets begin to recover, we intend to retain the substantial margin and cash flow improvements well into the future.
Where Environmental, Social, and Governance (ESG) is concerned, we continue to stay focused on the reduction of our CO2 footprint and water consumption whilst minimizing the biodiversity impact of our quarrying activities. We continue to adhere to the highest international standards of corporate governance, and industry occupational health and safety practices. The Group remains as committed as always in our social responsibility towards our employees and neighboring communities.
We greatly appreciate the constant trust and support from our shareholders, our Board of Directors, our customers, our communities, and our stakeholders. We assure you that we are totally dedicated to meeting - and indeed exceeding - your expectations in the coming year and beyond.