SCG Ceramics Q4 Results Show Decline in Revenue and Profit, While Overall Profit for 2019 Increases by 158 Million Baht. The Company Accelerates Plans to Strengthen Sales Channels and Partners with Allies to Expand the New "Ceramic Family" Model, Anticipating Increased Market Share.

 

           

Mr. Nampol Malichai, Managing Director of SCG Ceramics Public Company Limited, a manufacturer and distributor of tiles under the brands "COTTO," "SOSUCO," and "CAMPANA," stated that the consolidated financial results for COTTO in Q4 showed sales revenue of 2,545 million Baht, a decrease of 6% compared to the same period last year and a 7% decrease from the previous quarter, resulting in a loss of 70 million Baht, a decline of 207% from the same period last year and a 180% decrease from the previous quarter. This was attributed to a slowdown in the market compared to the previous year and non-recurring expenses related to a mutual agreement for a workforce reduction amounting to 85 million Baht.

          In 2019, the company reported total sales revenue of 11,074 million Baht, a decrease of 4% from 2018, with a net profit of 168 million Baht, an increase of 158 million Baht from the previous year, due to reduced production costs following a decline in natural gas prices, as well as improved cost management and production efficiency, alongside reduced administrative, sales, and marketing expenses as targeted. Additionally, there was an increase in profits from land sales in the Nong Kha Industrial Estate compared to the previous year.

          In 2019, the company generated export revenue of 1,946 million Baht and sales revenue in the ASEAN region of 1,370 million Baht. In Q4 of 2019, export revenue was 466 million Baht, accounting for 18% of total sales, a decrease of 12% from the same period last year, with sales volume in the ASEAN region representing 17% of total sales volume, down 3% from the previous year.

 

          Sales in the international market decreased by 23% from the previous year due to the global economic slowdown caused by the prolonged trade war and the continuous appreciation of the Thai Baht, impacting ceramic tile sales in all areas, particularly in international markets outside of Cambodia, Laos, and Myanmar. Meanwhile, the domestic ceramic market in Q4/2019 was affected by the economy and consumer purchasing power, which has yet to recover, resulting in a slight overall decline in the domestic ceramic market.

            However, government measures such as infrastructure projects, the Eastern Economic Corridor (EEC) development projects, and initiatives aimed at assisting real estate operators and supporting low-income individuals in acquiring their own homes, such as reducing transfer and mortgage fees to 0.01%, a 50 billion Baht loan scheme from the Government Housing Bank for homes priced below 3 million Baht, and a special fixed interest rate of 2.5% for the first three years, along with relaxed Loan to Value (LTV) measures, are considered significant positive factors for the construction materials industry. It is believed that these measures will help stimulate demand for ceramic tiles, resulting in the company achieving domestic ceramic tile sales close to the same period last year.

 

           Therefore, in 2020, "SCG Ceramics" anticipates that the domestic ceramic market will improve, growing by 1-3% with a total market value of 30-35 billion Baht. However, caution is advised due to ongoing economic uncertainties that may negatively impact the business. Additionally, the company aims to explore customer segments in the CLM market, particularly in Myanmar, which has a high growth rate of up to 10%.

          Consequently, "SCG Ceramics" is adjusting its business plan to accelerate the expansion of the "Ceramic Warehouse", a retail store selling ceramic tiles for the mid-range market, to cover areas that meet customer demand and increase sales opportunities through this channel. The company is developing a new business model, "Ceramic Family", in collaboration with capable distributors to jointly open "Ceramic Warehouse" branches, aiming to expand to 100 branches by 2023 with an investment budget of over 500 million Baht, up from the current 28 branches. This model is expected to reduce the company's costs by approximately 3% from store management expenses and branch construction costs.

          The "Ceramic Family" model integrates the company's strengths as a manufacturer of products that cover all market levels, while distributors have customer bases and relationships with consumers in the area and suitable store locations. By joining forces, this will maximize benefits for customers as the "Ceramic Warehouse" will be located in the same area as the distributors' stores, which are familiar locations for customers, making it easier and more convenient for them to access services.

       In the past year, the "Ceramic Warehouse," which is a retail store for mid-range ceramic tiles, has seen satisfactory sales and growth, with sales increasing by 20% compared to the previous year. The company aims to accelerate the expansion of branches to cover target areas more quickly. Recently, it has partnered with a distributor, Thai Chiang Ranong Co., Ltd., to open the first "Ceramic Family" branch in Ranong province and is in the process of collaborating with Chonburi Ung Yong Long Co., Ltd. and Nakhon Si Thammarat Material Co., Ltd. to open "Ceramic Warehouse" branches under this business model.

The distributor stores will focus on products from mid-range to high-end, complemented by "Ceramic Warehouse" which will offer products from the mid-range down. This model not only enhances the capabilities of the distributor stores but importantly, consumers will benefit from a wider selection of ceramic tiles available for purchase, covering all levels under the brands we produce and import, making it a collaborative effort that benefits all parties involved.