Cambodian subsidiary of Siam Cement reports light activity in construction sector led to low demand for building materials

Photo by: Heng Chivoan

Trucks wait in line at Kampot Cement's factory in Kampot province at the end of October. The firm saw demand fall last year but a company stakeholder said Tuesday sales were expected to pick up in 2010 as construction activity begins to recover.

We hope this year's sales will increase by 10 percent, as construction seems to be more active than before."

KAMPOT Cement Co, a joint venture with Thailand’s Siam Cement Group, said Tuesday that sales slumped 15 percent last year compared to 2008 as construction activity dropped following the onset of the economic crisis in the Kingdom.

Khaou Phallaboth, president of Cambodia’s Khaou Chuly Group, a stakeholder in the company, said that Kampot sold just 1.02 million tonnes of cement in 2009 compared to 1.2 million the previous year.

He did not give a revenue or profit figure, but the company sells cement at US$87 to $90 a tonne, which would place revenues between $88.74 million and $91.8 million.

“The fall in sales last year stemmed from bank restrictions on the disbursement of loans to trading bodies and building developers which were affected by the global financial crisis,” said Khaou Phallaboth.

According to a report by the Ministry of Land Management, Urban Planning and Construction, in the first 10 months of last year, total investment in the construction sector dropped 19.6 percent to just $1.89 billion from $2.35 billion over the same period the previous year.

Cement imports fell even more over the first three quarters of last year, by just over 23 percent, according to figures released by Sihanoukville Autonomous Port.

The last quarter of 2008 saw construction activity nosedive in Cambodia as foreign developers pulled out, capital dried up and demand for building materials plummeted.

Thai Mengly, manager of construction projects at New World City which builds residential property in Phnom Penh, said Tuesday that construction activity at his firm was hampered in 2009 because of a backlog as buildings stalled at the end of 2008.

“We cannot compare our construction in 2009 to that of 2008 because things stagnated by the global economic crisis,” he said. He declined to give construction data for last year.

In 2009, total demand for cement in Cambodia was reportedly 2 million tonnes in total, a 20 percent drop from 2.5 million tonnes in 2008, meaning that Kampot Cement beat the decline to capture a greater share of the overall market.

Khaou Phallaboth said that Kampot Cement’s operations had not been badly affected last year, despite the slump in only its second year of operations since its January 2008 start-up.

“We hope this year’s sales will increase by 10 percent, as construction seems to be more active than before,” said Khaou Phallaboth, adding that the firm would produce about 1 million tonnes this year and import a further 200,000 tonnes from its parent in Thailand.

His prediction echoed that of Siam Cement Pcl’s President Kan Trakulhoon, who told Bloomberg Thursday that sales for the whole group would expand at least 10 percent, a projection made on rising prices for cement. Still, higher oil prices would likely raise production costs, he added.

Kampot Cement said in late October that it was holding plans to double production capacity by the end of 2012 due to falling demand last year. Khaou Phallaboth told the Post at the time that demand for cement was unlikely to start to recover until 2011 into 2012, and that Kampot Cement will stall plans for a $200 million upgrade that would have seen production capacity jump to 2 million tonnes per year.

Siam Cement holds a 90 percent stake in Kampot Cement. Khaou Chuly’s stake is scheduled to rise to 20 percent following the expansion, for which there is currently no schedule.