Siam Cement Public Company Ltd. (SCC), better known as Siam Cement Group (SCG), a business conglomerate from Thailand, is expanding its business into packaging paper by acquiring 55 percent stake in PT Fajar Surya Wisesa Tbk (FASW) worth Rp 9.6 trillion. SCG is eyeing the packaging paper market in Indonesia, which has a threefold growth compared to the Thai market.
This is one of the biggest acquisitions this year after PT Semen Indonesia Tbk completed the acquisition of 80.6 percent stake in PT Holcim Indonesia Tbk worth Rp 13.57 trillion in January 2019. SCG is estimated to spend more in carrying out tender offers to other shareholders of FASW. This transaction is expected to be completed in the third quarter of 2019.
SCG President and CEO Roongrote Rangsiyopash said the acquisition could help SCG in increasing its growth in Asean, especially in Indonesia, which has a population of 270 million people with per capita packaging paper consumption of 32.6 kg/person.
Last year, FASW posted packaging paper sales of 1.38 million tons with a value of Rp 9.94 trillion and a net profit of Rp 1.4 trillion. The company’s total asset was Rp 10.97 trillion as of December 31, 2018.
SCG entered FASW through its subsidiary, SCG Packaging Public Company Ltd. “Over the past few years, SCG Packaging has demonstrated its ability to grow its business in ASEAN through organic growth and acquisitions,” Roongrote said in an official statement on Friday (5/10).
In an interview with The Nation, SCG Packaging President Director Tanawong Areeratchakul said expansion of production base in ASEAN is the key to boost growth. In 2018, the packaging paper market reached US$ 50.5 billion (around Rp 697 trillion) in ASEAN.
The growth of packaging paper sales reached five percent in ASEAN, while growth in Thailand was only three percent, lower than the ASEAN average. Although competition in the packaging industry is getting tougher, the company is optimistic that there are new opportunities that can be achieved to develop its business.
Last year, SCC’s revenue from packaging paper sales reached 87.25 billion baht (around Rp 39.96 trillion), rising 20 percent compared to 2017. The packaging business revenue contributed 18 percent to SCC’s total consolidated revenue of 478.44 billion baht (around Rp 219 trillion).
The petrochemical business contributed the highest of 46 percent (Rp 100.79 trillion) to SCC’s revenue in 2018. Meanwhile, the cement and building materials business contributed 36 percent (Rp 78.84 trillion) of the company’s revenue.
SCC Intensely Diversifying Its Business
This is not the first time SCC has diversified its business in Indonesia. Initially, the company that entered Indonesia in 1995 only had a marketing office. Currently, it has more than 20 companies engaged in various fields, such as cement, building materials, petrochemicals, retail building materials, and distribution.
In July 2018, SCC through its subsidiary SCG Retail Holding Co Ltd acquired 29 percent stake in PT Catur Sentosa Adiprana Tbk (CSAP) worth Rp 324.24 billion. Catur Sentosa is a company operating a building material retailer called Mitra 10. CSAP through its subsidiaries has around 40 principals and a network of 35 thousand modern retailers and traditional stores.