SCG Ceramics, a new business model for improved competitiveness

One year on from the merger that lead to a more efficient, integrated management of the various plants, the Thai company has reported a big improvement in profitability.

2018 was a challenging year for SCG Ceramics, Thailand’s largest ceramic tile producer and market leader whose brands COTTO, Campana and Sosuco hold a 58% share of the domestic market. The company owned by the multinational SCG Group (the second largest world ceramic tile group) has not proved immune to the effects of falling demand and growing competition in the domestic market. Tile sales have dropped 10% in both volume (69.7 million sq.m) and value (around 341 million euros), further worsening a level of profitability that had already been hit by the increase in energy costs and irregular expenses.

To deal effectively with the challenging market environment and lay the foundations for a return to profitability and growth, the SCG Group decided to completely restructure its ceramic business during the year. SCG Ceramics Public Co. was formed on 1 August 2018 as an amalgamation of the 5 companies Thai Ceramic Company (TCC), Thai-German Ceramic Industry (TGCI), Siam Ceramic Group Industries (SGI), Sosuco (SSG) and Gemago (GMG).

The aim was to create commercial and production synergies and improve the company’s competitiveness through more efficient management and rationalisation of the Thai plants, which reached a production capacity of 94 million sq.m at the end of 2018.

“Firstly, this is being done through integrated management of the various plants with the aim of shifting from a brand-based to a cost-based mentality”, Numpol Malichai, the managing director of SCG Ceramics, explains. “Although the transition from brand-based to cost-based factories is still under way, the initial effects were already evident in the company report for the first half of 2019, which shows a big improvement in profitability”, he added.

EBITDA grew by 37% with respect to the first half of 2018, and net profit grew by 182%.

Read the complete interview published in Ceramic World Review 133/2019