SCGP: Facing Profit Decline in 3Q24 Amid Market Headwinds
UOB Kay Hian
October 10, 2024
SCGP (SCGP TB), a leading packaging solutions provider in Thailand, is expected to face a challenging 3Q24 as profit is anticipated to decline both quarter-on-quarter (qoq) and year-on-year (yoy). Several market conditions, including weaker demand and increased costs, are contributing to this decline. However, SCGP’s strong market position and strategic initiatives are expected to help the company navigate these headwinds in the longer term.
Decline in Profit for 3Q24
SCGP’s net profit for the third quarter of 2024 is projected to decline on both a qoq and yoy basis. This is largely attributed to softer demand across its key markets and higher input costs, which have squeezed margins. The packaging industry has faced headwinds due to global economic uncertainties and fluctuations in raw material prices, particularly for paper and packaging materials, which have impacted profitability.
SCGP’s management has acknowledged these challenges, citing a difficult operating environment with rising production costs and softer-than-expected demand in several regions, including Southeast Asia. Despite these short-term challenges, SCGP remains focused on maintaining operational efficiency and managing costs to mitigate the impact on its bottom line.
Strategic Focus on Long-Term Growth
While the near-term outlook is difficult, SCGP continues to focus on long-term strategic initiatives to drive future growth. The company remains committed to expanding its product portfolio and investing in innovative packaging solutions that meet the evolving needs of its customers. Additionally, SCGP is actively pursuing opportunities in sustainable packaging, a key growth area as demand for environmentally friendly packaging solutions continues to rise.
SCGP’s strong market position in Thailand and its expanding presence in regional markets give it a solid foundation to capitalize on future growth opportunities. The company’s diversification into new markets and products is expected to support revenue growth and margin recovery in the coming quarters.
Operational Efficiency and Cost Management
To counteract rising input costs, SCGP is placing a strong emphasis on operational efficiency and cost management. The company has implemented several initiatives aimed at optimizing production processes, reducing waste, and improving energy efficiency. These efforts are expected to help offset some of the pressure from higher raw material costs and support margin stabilization in the medium term.
In addition, SCGP is focused on improving supply chain management and enhancing its logistics capabilities to streamline operations and reduce transportation costs. By maintaining tight control over its operating expenses, SCGP aims to preserve profitability even during periods of weaker demand.
Conclusion
SCGP is facing a challenging 3Q24 with expected declines in profit driven by weaker demand and rising costs. However, the company’s strategic focus on innovation, sustainability, and operational efficiency positions it for long-term success. Investors should be mindful of the short-term pressures but recognize SCGP’s potential for recovery and growth as market conditions stabilize. SCGP’s strong foundation and commitment to sustainability make it a key player in the packaging industry with opportunities for future expansion.
UOB Kay Hian
October 10, 2024
