Siam City Cement Public : Management Discussion and Analysis Quarter 2 Ending 30 Jun 2022 (Revised)

	ENGLISH TRANSLATION
SCCC 18/2022
	26 July 2022
Subject:	Management discussion and analysis of the Quarter 2/2022
Attention:	Managing Director,
	The Stock Exchange of Thailand
Attachment:	A copy of the interim financial statements of SCCC for the three-month and
	six-month periods ended 30 June 2022

We hereby submit to you the separate financial statements and consolidated financial statements of Siam City Cement Public Company Limited and its subsidiaries for the three-month and six- month periods ended 30 June 2022 compared to the same period of 2021 with a summary of our operating result as mentioned below:

Q2/2022: Revenues up with project activity driving demand in both domestic and overseas markets, albeit with some continued margin pressures due to increased energy and bulk material cost

• Infrastructure projects continued to support cement consumption in Thailand; demand in overseas markets was softer, mostly caused by higher market prices of construction material
• Noticeable improvement on increasing sales price to reflect rising fossil fuel prices and electrical energy and raw material costs and to mitigate pressure on profitability

• Continued strong operating performance achieved in Sri Lanka despite difficult macro- economic environment; softening currency devaluation resulted in overall higher net income for the Group on a like-for-like basis.

SCCC Group performance

						in THB million
		Q2 (3-month)		YTD (6-month)
Group performance Q2	Q2/22	Q2/21	%YoY	6M/22	6M/21	%YoY
Net Sales	12,758	10,051	26.9	25,334	20,429	24.0
EBITDA	3,208	2,155	48.9	6,033	4,709	28.1
Net Profit	1,355	1,445	-6.2	2,157	2,509	-14.0
Earnings per share (THB)	4.55	4.85	-6.2	7.24	8.42	-14.0

• Excluding one-time tax benefit in Sri Lanka, 2021 net profit and EPS amounted to THB 1,780 million and THB 5.97 (6 months) and THB 716 million and THB 2.40 (3 months), respectively

Overall construction market softened during the second quarter amidst increasing prices of construction material in domestic and overseas markets. Cement demand was slower in the retail market whereas demand for bulk material continued at a moderate growth level. Accelerated activities for key infrastructure project resulted in a moderate sales volume growth for the Group. Coupled with initiatives to pass-through increased material and energy cost to cement prices, overall net sales increased by 27% compared to the second quarter of last year. Despite an environment of geopolitical tensions, rising input cost and supply chain disruption, the Group achieved solid operating results, driven by overseas markets particularly Sri Lanka and Vietnam. In addition, solid results from associated companies positively impacted the Group's performance. As a result, EBITDA increased 49% compared to the second quarter of prior year. Excluding prior year's one-time income tax benefit in Sri Lanka, net income was positively impact by a strong operating performance, lower depreciation and financial expenses, despite continuing but slowing currency devaluation in Sri Lanka.

Segmental performance

Cement

					in THB million
		Q2 (3-month)		YTD (6-month)
Cement	Q2/22	Q2/21	%YoY	6M/22	6M/21	%YoY
Net sales	9,084	7,025	29.3	17,973	13,933	29.0
EBITDA	2,886	1,809	59.5	5,314	3,868	37.4

Remark: EBITDA by segment is presented before intersegment elimination

Thailand domestic cement market: Infrastructure projects continued to be a key channel to support domestic cement consumptions and strong market demand. This positive momentum led to higher cement sales volume and coupled with cement price improvement, led to a solid net sales growth of 26%. However, continued pressure from coal and diesel cost increases could not be fully offset by higher product pricing and overall profitability dropped.

In southern Vietnam, cement demand softened during the second quarter due to multiple market price increases. Despite lower volumes and continued competitive pressure, higher sales price realization resulted in a 23% increased topline. Sustained pressure from raw material and energy costs were fully offset by operational efficiencies and higher topline resulting in increased overall profitability.

In Sri Lanka, cement demand slowed down during the second quarter owing to continued foreign currency liquidity issues and high inflation resulting in lower disposal income. Despite lower sales volume, significant price adjustments needed to mitigate higher input costs resulted in 50% higher net sales. The solid operating performance was able to mitigate the impact from the devaluation of the local currency on the net income level, excluding the impact from prior year's one-time income tax rate adjustment.

In Bangladesh, cement demand continued slower than expected because of the high prices of other construction materials, particularly steel. Depressed construction activity resulted in softer cement sales volume and contributed to intensifying price competition. Nevertheless, some price increases could be realized during the latter part of the first quarter and resulted in 16% higher net sales. The steep increase of bulk material prices, however, negatively weighed on overall profitability.

In Cambodia, overall cement demand remained subdued, with slowdown infrastructure activity compared with previous years. As a result, sales volume was soft compared to last year and pricing remained under pressure in a more competitive environment. A further increase in coal prices negatively affected production cost and led to pressure on profitability.

Concrete and Aggregates

					in THB million
		Q2 (3-month)		YTD (6-month)
Concrete and Aggregates	Q2/22	Q2/21	%YoY	6M/22	6M/21	%YoY
Net sales	1,559	1,329	17.3	3,013	2,831	6.4
EBITDA	54	85	-36.5	143	226	-36.7

Remark: EBITDA by segment is presented before intersegment elimination

Concrete and Aggregates: Thailand construction market continued with accelerated activity due to inflationary impact from rising raw material and transportation cost. Government infrastructure remained the most promising construction sector driver with the commencement of some high- speed rail projects and led to overall higher sales volume during the second quarter. Coupled with additional price increase, net sales increased in Q2 by 17%. However, cost inflation could not be fully passed-thorough to customers and led to overall lower profitability.

Trading

					in THB million
		Q2 (3-month)		YTD (6-month)
Trading	Q2/22	Q2/21	%YoY	6M/22	6M/21	%YoY
Net sales	1,185	855	38.6	2,448	1,929	26.9
EBITDA	70	43	62.8	134	86	55.8

Remark: EBITDA by segment is presented before intersegment elimination

Trading: International trading activities were negatively impacted by pandemic-related controls in China as well as higher bulk material and transportation cost putting more pressure on market demand. However, overall higher cost of bulk material and shipping cost charged to customers resulted in a 39% rise in net sales and profitability increased due to higher gross margins on clinker and slag contracts.

Waste Management Services and Others

in THB million

Waste Management Services		Q2 (3-month)		YTD (6-month)
and Others	Q2/22	Q2/21	%YoY	6M/22	6M/21	%YoY
Net sales	274	270	1.5	561	509	10.2
EBITDA	148	171	-13.5	325	358	-9.2

Remark: EBITDA by segment is presented before intersegment elimination

Waste Management Services: The Ecocycle business continued to offer customized and sustainable solutions to a wide range of customers. The company strengthened its position in waste management and benefited from higher price and volumes of light waste material and carbon black. Industrial services strengthened its business activities with additional projects in chemical cleaning. As a result, net sales increased by 2% and profitability improved due to better operational cost management, excluding one-off transactions of other businesses in prior year.

Light building materials

					in THB million
		Q2 (3-month)		YTD (6-month)
Light building materials	Q2/22	Q2/21	%YoY	6M/22	6M/21	%YoY
Net sales	656	572	14.7	1,339	1,227	9.1
EBITDA	49	77	-36.4	133	198	-32.8

Remark: EBITDA by segment is presented before intersegment elimination

The overall residential market remained soft despite increased government support and developers starting new projects. Intensified market competition limited pricing opportunities. Overall net sales increased by 15%, mainly due to higher sales prices that were not enough to cover increased input costs.

The mortar business further expanded its sale of value-added products. Especially the sales in the retail channel resulted in a higher topline. Raw material and supply chain costs eroded profitability.

The fiber cement business was impacted by soft demand, especially in the retail segment. Higher prices positively impacted the topline, but profitability remained below prior year due to elevated variable costs.

The market for aerated concrete products started to recover and some price increases were realized during the latter part of the second quarter, resulting in an overall increased topline. Higher raw material and fuel cost however weighed negatively on the performance and resulted in lower profitability.