SCG Chemicals witnessed satisfactory operating results as the petrochemical industry has been experiencing an upswing since 2015. Increase in supply was lower than the growing demand in the market whilst most manufacturers managed to maintain their production at high capacity. The company has pledged to develop and increase sales of HVA products along with enhancing production efficiency and expanding business both domestically and internationally as planned.
- In 2016, revenue from sales of SCG Chemicals totaled 188,163 Million Baht, declining by 6% from the year earlier due to the sagging prices triggered by the drop in crude oil prices and scheduled plant maintenance at Rayong Olefins Co., Ltd. in the fourth quarter. Nevertheless, EBITDA was 59,700 Million Baht, and profit for the year was 42,084 Million Baht, up 39% and 48%, respectively year-on-year, attributable to wider product-to-feed margins as a result of persistent tight supply.
Market and Competition
- In 2016, the chemicals industry was experiencing an upswing, thanks to the dwindling output from new derivatives plants. Also, increase in supply was lower than the growing demand in the market, resulting in wider product-to-feed margins which contributed to SCG Chemicals' improved operating results.
- The prices of naphtha, the main feed, was 398 USD per ton, a drop of 19% from the previous year due to falling crude oil prices amid continued oversupply. The average prices of polyethylene and polypropylene resins were 1,132 and 1,051 USD per ton, a decrease of 8% and 9%, respectively year-on-year. However, in spite of lower product prices, the plummeting feedstock prices provided larger cost advantage, leading to wider product to-feed margins.
- On competition, the resin prices in the petrochemical business are cyclical subject to fluctuations tied to global resin prices and oil prices, which determine the cost of raw materials. To counteract the high volatility in resin and raw material prices and to prepare for critical situations, SCG Chemicals has pledged to develop numerous high value-added products and services (HVA). The emphasis is placed on research and development to create innovative products that better address the emerging application needs of customers. The company also utilizes its know-how and expertise in petrochemical operations to drive innovations and services to provide industrial solutions.
- Continuously developed special grades of resins for various applications such as medical devices, electrical appliances, automotive parts, and packaging, resulting in sales of HVA products and services that accounted for 54% of total revenue from sales.
- Expanded the Integrated Business Excellence (IBE) System. In 2016, the efforts allowed for the increased productivity of the plants, rearrangement of product groups, and cost reduction amounting to 3,100 Million Baht. To leverage innovation management, the company has implemented the Innovation Management Process (IMP) dedicated to enhancing the knowledge and capabilities in driving the innovations of the company.
- Increased capacity of low-density polyethylene (LDPE) to expand into the coating market, especially the high value-added coatings for aseptic packaging. The capacity expansion project, which increases the capacity from 92,000 to 152,000 tons per year, is slated for completion in 2017.
- Commenced manufacturing and supplying of a New Generation PE (PE 112) for plastic pipes used in mining and water supply. The improved mechanical properties of the new resins enable the reduction of pipe thickness, easy transportation, and better corrosion resistance by 40%, thereby ensuring the longer useful life of the pipes.
[Operating business in accordance with the principles of Sufficiency Economy with regard to moderation, reasonableness, and prudence]
Human Resources Development
- Promoted and developed learning of employees under supervision of the SCG Chemicals Academy committee tasked with overseeing the skills development of employees at all levels. To ensure the highest learning efficiency, the learning from experience: learning from others: formal learning model with a ratio of 70:20:10 has been employed.
[Operating business in accordance with the principles of Sufficiency Economy with regard to prudence and knowledge]
- Developed a manufacturing process for a New Generation PE with improved mechanical properties. The registered eight patents in 2016 and is upgrading the existing polyethylene plant to showcase such manufacturing technology. The plant upgrade is expected to be completed in 2018. The New Generation PE is ideal for various applications. Chief among them are the very thin film that uses less materials whilst maintaining the same strength, and high pressure pipes that provide better chemical resistance.
- Launched an innovation called Functional Material that works as an additive under the trademark (CIERRATM) at 2016 in Germany. Developed in collaboration with Oxford University in the United Kingdom, CIERRATM has three main applications: flame retardant polymers, barrier packaging and antimicrobial additives for consumer products.
- Provided robotic inspection and in-depth data analysis service for outside clients such as inspection of pipes in the olefin furnaces at petrochemicals plants and inspection of cables on large suspension bridges in collaboration with Expressway Authority of Thailand (EXAT). The commercialization of the robotics and data analysis system is a key mechanism to drive the Thailand robotics industry and reduce reliance on imported technology.
- The Design Catalyst unit offered product design to enhance product performance for clients. Examples include:
- A specially-designed syringe waste cartridge to ensure convenience and safe disposal of needles.
- Plastic water buoys for installation of floating solar panels in different water sources such as dams, water reservoirs, and wells to maximize water source management. They are designed to provide easy installation, save space, and accommodate various installation requirements to align with the landscape. [Operating business in accordance with the principles of Sufficiency Economy with regard to moderation and prudence]
Sustainable Development in Business Operations
- SCG Chemicals has focused on developing eco-friendly products, services, and processes, resulting in sales of SCG eco value accounting for 52% of total revenue from sales. Furthermore, the company has pledged to promote the livelihood and uplift the quality of life of the communities surrounding the plants, generating extra income of 15 Million Baht annually. Added to this was the establishment of 13 social enterprises in Rayong Province.
- Shared and transferred knowledge with the surrounding communities and industrial plants to help build eco-factories and communities in Thailand. Examples included:
- Khao Yai Da Water Conserving Station in Rayong, an eco-learning center dedicated to promoting water management and the principles of Sufficiency Economy to the community.
- Neun Kho Fishery Learning Center in Rayong dedicated to transferring knowledge on the sustainable conservation of coastal and marine ecosystems
- Shared knowledge as a pioneering eco factory to empower other factories to operate in accordance with the eco factory criteria [Operating business in accordance with the principles of Sufficiency Economy with regard to moderation, prudence, knowledge and virtues]
SCG Chemicals Consolidated Financial Information (Million Baht)
|Information from Statements of Financial Position
|Information from Income Statement
|Revenue from sales
|Cost and expenses
|Profit for the year *
* Profit for the year attributable to owners of the parent.
** Profit before finance costs, income tax expense, depreciation and amortization and includes dividends from associates.