Company watching economic trend closely before proceeding with expansion plans
Boonthavorn, like its retail customers, has grown cautious about spending billions of baht on building up its chain of speciality stores for construction materials and home improvement products, despite the upturn in the economy.
"Although the economy overall shows signs of recovery, we need time to be sure in which direction to go," Sitthisak Tayanuwat, commercial vice president for Boonthavorn Ceramic, said yesterday.
The company is considering whether to speed up or put on hold its expansion plan to cover all the big cities upcountry such as Chiang Mai, Phuket and Hua Hin. Its provincial sales account for only 20 per cent of its total sales. A brokerage source said Boonthavorn had planned to raise funds from the public, but there has been no movement for a while.
Instead, Boonthavorn has opted to widen its market into a younger segment by refreshing its brand and renovating its six showrooms with a five-year budget of more than Bt1 billion. This is considered its biggest overhaul in 30 years of doing business.
The six Boonthavorns are located in the Ratchada, Rangsit, Pinklao, Suvarnabhumi and Thon Buri-Pakthor areas of greater Bangkok and in the beach resort city of Pattaya.
Construction on the new Kaset-Navamin branch in Bangkok with total retail space of 40,000 square metres is already 75 per cent complete. When it opens next quarter it will also display furniture and lighting.
"Changes in people's lifestyles such as the way they think or make buying decisions led us to refresh our Boonthavorn brand and showrooms to expand our target group to youngsters, who just graduated or started working, aged down to 25 years," Sitthisak said.
"Up to the present, our target group was concentrated on middle-age customers who are more than 35."
Customer buying behaviour is proactive, as shoppers come to Boonthavorn for the purpose of buying something. But over the past six to 10 years, what the new generations want are convenience and value for their money, he said.
Major products carried by Boonthavorn stores are wall and tile ceramics, kitchenware, sanitary ware, paints, lighting, tools and hardware.
Boonthavorn offers strong brands and a wide variety with 80,000 items from its suppliers and 30,000 patterns of ceramics. But, its name does not register with youngsters, he said.
Boonthavorn's customers come in four categories - retail, regular, deep pocket and project. The company's sales were most hit by project customers since fewer real estate developments were started.
Retail represents 25 per cent of total sales. This group was affected only slightly by the economic crisis, but individual customers are more cautious than before.
The regular group, consisting of professionals such as architects, contractors and designers, has experienced a drop in home-building work. The company tries to retain this group by launching a CRM programme for two years.
Recently, Boonthavorn opened a Builder Contractor and Designer Club, which now has 100,000 members, at its Ratchada showroom for architects and home-building specialists to use as a library or centre for meeting with their clients.
The deep-pocket customers, who normally spend a large sum per bill, have largely escaped the economic contraction.
This year the company has spent Bt200 million-Bt300 million on improving its product variety.
Boonthavorn's workforce numbers 2,000 and has never been reduced since the wake of the economic crisis of 1997.
The company recently lowered its sales target for this year to Bt7.5 billion from Bt8 billion set earlier. It booked Bt7.3 billion in sales last year.
Monday, August 31, 2009
Tuesday, August 25, 2009
Lead poison scandal grows
The impact of a Chinese lead poisoning scandal spread to another two provinces yesterday, threatening further cuts in supply from the world's top producer of the metal.
Hunan, the second-biggest producer of refined lead among China's provinces,and Guangxi, which ranks number five,are checking smelters after protests by parents at a lead and zinc smelter operated by Dongling Group inChangqing, Shaanxi province, and at a manganese smelter in Hunan earlier this month.
"The result of the checks will come in another few days," a smelter official in Hunan said, adding that possible closures of lead smelters would depend on the findings.
Lead poisoning is endemic among villages near Chinese smelters.
In Shaanxi's Fengxian, where smoke billows from a Dongling Group zinc smelter, two wan and listless toddlers tested with high levels of lead in their blood earlier this year.
"These problems are really common.It's just that the Dongling case in Changqing got some attention," said a villager.
Older villagers develop circulatory problems and some workers got too sick to work.
"This environmental pollution is not unique to Fengxian. It's all over."
Lead poisoning due to air and water pollution from poorly regulated smelters and mines haunts the valleys of the orerich Qinling range, in a poor and remote part of China.
The problem dogs heavy metals bases in Hunan, Henan, Yunnan and Guangdong provinces. Closing polluting plants has pushed the industry to poorer areas where any investment is welcome.
The shift to poorer regions echoes the migration of the lead smelting industry to China over the last decade,as stricter environmental laws forced smelters in richer countries to close.
In late 2005, two of China's largest zinc smelters shut temporarily after cadmium contaminated the Pearl River Delta and the Xiang River, sources of drinking water for millions in Hunan and Guangdong Provinces.
More than 1,500 children have tested positive to excessive amounts of lead in the past two weeks.
Hunan, the second-biggest producer of refined lead among China's provinces,and Guangxi, which ranks number five,are checking smelters after protests by parents at a lead and zinc smelter operated by Dongling Group inChangqing, Shaanxi province, and at a manganese smelter in Hunan earlier this month.
"The result of the checks will come in another few days," a smelter official in Hunan said, adding that possible closures of lead smelters would depend on the findings.
Lead poisoning is endemic among villages near Chinese smelters.
In Shaanxi's Fengxian, where smoke billows from a Dongling Group zinc smelter, two wan and listless toddlers tested with high levels of lead in their blood earlier this year.
"These problems are really common.It's just that the Dongling case in Changqing got some attention," said a villager.
Older villagers develop circulatory problems and some workers got too sick to work.
"This environmental pollution is not unique to Fengxian. It's all over."
Lead poisoning due to air and water pollution from poorly regulated smelters and mines haunts the valleys of the orerich Qinling range, in a poor and remote part of China.
The problem dogs heavy metals bases in Hunan, Henan, Yunnan and Guangdong provinces. Closing polluting plants has pushed the industry to poorer areas where any investment is welcome.
The shift to poorer regions echoes the migration of the lead smelting industry to China over the last decade,as stricter environmental laws forced smelters in richer countries to close.
In late 2005, two of China's largest zinc smelters shut temporarily after cadmium contaminated the Pearl River Delta and the Xiang River, sources of drinking water for millions in Hunan and Guangdong Provinces.
More than 1,500 children have tested positive to excessive amounts of lead in the past two weeks.
Monday, August 24, 2009
Q-Con maintains sales goals
SET-listed Quality Construction Products Plc, a manufacturer and distributor of lightweight concrete under the Q-Con brand, has maintained its sales estimates for 2009 despite falling short of its target in the first half.
Second-quarter sales missed its estimate by 25% on 195 million baht, making first-half figures fall 13.5% to 450 million,said Kitti Soonthornmanokul, vicepresident of the sales and marketing.
The company earlier projected revenue of 520 million in the first six months,Mr Kitti acknowledged.
"The second quarter saw a business slowdown, especially in the private sector,for high-rise building construction where some projects have been delayed. Also,purchasing power in the provinces has declined due to the falling prices of agricultural products," he said.
"However, demand recovered for the low-rise building sector by the end of last quarter," noted Mr Kitti.
Despite the weak performance in the first half, he said Q-Con is still hoping to maintain its sales goal of 260 million baht for each quarter in the latter half.
"Looking at rising orders in July and this month, we are confident that the second half will be better than the second quarter," he said.
The company is penetrating the provincial market and creating marketing campaigns to lift volume and product prices.
"The government is launching infrastructure projects such as mass transit rail lines, highways and roads. We will see an increase in high-rise building construction along the rail lines," he added.
Q-Con's revenue slid 8% to 198 million baht in the second quarter with net loss decreasing to 7 million baht from 18 million the same period last year.
Mr Kitti said profit margin this year will be on par with last year due to lower oil prices and raw material costs.
Q-CON shares closed yesterday on the SET at 1.60 baht, up 2 satang, in trade worth 538,000 baht.
Second-quarter sales missed its estimate by 25% on 195 million baht, making first-half figures fall 13.5% to 450 million,said Kitti Soonthornmanokul, vicepresident of the sales and marketing.
The company earlier projected revenue of 520 million in the first six months,Mr Kitti acknowledged.
"The second quarter saw a business slowdown, especially in the private sector,for high-rise building construction where some projects have been delayed. Also,purchasing power in the provinces has declined due to the falling prices of agricultural products," he said.
"However, demand recovered for the low-rise building sector by the end of last quarter," noted Mr Kitti.
Despite the weak performance in the first half, he said Q-Con is still hoping to maintain its sales goal of 260 million baht for each quarter in the latter half.
"Looking at rising orders in July and this month, we are confident that the second half will be better than the second quarter," he said.
The company is penetrating the provincial market and creating marketing campaigns to lift volume and product prices.
"The government is launching infrastructure projects such as mass transit rail lines, highways and roads. We will see an increase in high-rise building construction along the rail lines," he added.
Q-Con's revenue slid 8% to 198 million baht in the second quarter with net loss decreasing to 7 million baht from 18 million the same period last year.
Mr Kitti said profit margin this year will be on par with last year due to lower oil prices and raw material costs.
Q-CON shares closed yesterday on the SET at 1.60 baht, up 2 satang, in trade worth 538,000 baht.
Sunday, August 23, 2009
Other industries support upstream push
Industry operators support establishing an upstream steel industry in Thailand as it would reduce risks from importing expensive steel products.
Ninnart Chaithirapinyo,vicechairman of Toyota Motor Thailand, said an upstream steel producer would vastly reduce the production cost of locally made vehicles. Locally produced steel is 10-15% cheaper than imported products because of import tax, logistics cost and shipment insurance, he said.
Local supply would also allow production flexibility as imported steel purchasing orders must be made three months in advance. Local supply would also eliminate exchange-rate and price fluctuations as speculative investment can affect global steel prices, said Mr Ninnart.
Local production promotes development of other industries that need quality steel products such as shipbuilding, bus,rail and plane assemblers.
The government should support steel industry development, especially local community understanding of the industry and environmental protection,he said.
"Interested investors for projects need to know the government's direction,"said Mr Ninnart.
Last year, the automotive industry contributed 900 billion baht or 10% of GDP. The industry employs 1.2 million workers and vehicles are the secondlargest export product, in terms of value.Electrical and electronics items are the country's top export.
Payungsak Chartsutipol, president of the Steel Industry Club at the Federation of Thai Industries (FTI), agrees the country needs upstream steel production.
"All industries would benefit. We use 13 million tonnes of steel products yearly to support various industries," he said.
"While steel demand is expected to surge to 15 million in a few years, we should have local production to complete the supply chain, create local jobs and guard against steel speculation and exchange-rate fluctuation."
According to Vikrom Vajragupta, director of the Iron and Steel Institute of Thailand (ISIT), four upstream steel investors - Japan's Nippon Steel and JFE Steel, India's Arcelor-Mittal and China's Baosteel - have all filed preliminary environmental and community management plans to the Board of Investment (BoI).
An upstream steel industry development team under Industry Ministry supervision has selected three to four potential sites in the southern and eastern regions. The sites need massive environmental rehabilitation and investors are expected to contribute to this improvement.
"The project would also have to be acceptable to the local community," said Mr Vikrom.
The ISIT is now waiting for 38 million baht from the 2010 government budget to be disbursed so it can go ahead with in-depth research on the finalist sites.
Ninnart Chaithirapinyo,vicechairman of Toyota Motor Thailand, said an upstream steel producer would vastly reduce the production cost of locally made vehicles. Locally produced steel is 10-15% cheaper than imported products because of import tax, logistics cost and shipment insurance, he said.
Local supply would also allow production flexibility as imported steel purchasing orders must be made three months in advance. Local supply would also eliminate exchange-rate and price fluctuations as speculative investment can affect global steel prices, said Mr Ninnart.
Local production promotes development of other industries that need quality steel products such as shipbuilding, bus,rail and plane assemblers.
The government should support steel industry development, especially local community understanding of the industry and environmental protection,he said.
"Interested investors for projects need to know the government's direction,"said Mr Ninnart.
Last year, the automotive industry contributed 900 billion baht or 10% of GDP. The industry employs 1.2 million workers and vehicles are the secondlargest export product, in terms of value.Electrical and electronics items are the country's top export.
Payungsak Chartsutipol, president of the Steel Industry Club at the Federation of Thai Industries (FTI), agrees the country needs upstream steel production.
"All industries would benefit. We use 13 million tonnes of steel products yearly to support various industries," he said.
"While steel demand is expected to surge to 15 million in a few years, we should have local production to complete the supply chain, create local jobs and guard against steel speculation and exchange-rate fluctuation."
According to Vikrom Vajragupta, director of the Iron and Steel Institute of Thailand (ISIT), four upstream steel investors - Japan's Nippon Steel and JFE Steel, India's Arcelor-Mittal and China's Baosteel - have all filed preliminary environmental and community management plans to the Board of Investment (BoI).
An upstream steel industry development team under Industry Ministry supervision has selected three to four potential sites in the southern and eastern regions. The sites need massive environmental rehabilitation and investors are expected to contribute to this improvement.
"The project would also have to be acceptable to the local community," said Mr Vikrom.
The ISIT is now waiting for 38 million baht from the 2010 government budget to be disbursed so it can go ahead with in-depth research on the finalist sites.
Sahaviriya reluctant to invest more until green rules clarified
The Sahaviriya Group, the country's largest steel producer, will not invest in any big projects locally until uncertainties about environmental and health impact regulations are cleared up, says president Win Viriyaprapaikit.
"There's too high a risk for us to invest a lot of money here; we also need to limit our damages. From now on we will invest only in small projects that complement the production lines we already have here, so there will be limited damage if anything happens," he said.
"We would rather invest in massive capital projects overseas."
Sahaviriya recently abandoned a fouryear attempt to develop an upstream steel project and smelter worth 500 billion baht. It had faced strong opposition by environmental activists and communities near the planned site in Prachuap Khiri Khan.
However, the final decision to give up - after 3 billion baht in preparation costs - came after a court in April declared the heavily industrialised Map Ta Phut area of Rayong a pollutioncontrol zone. The ruling called into question a whole range of environmental regulations and put the brakes on hundreds of billions of baht in planned industrial investments.
At issue is the interpretation of Section 67 of the 2007 Constitution, which seeks to protect the public from the harmful effects of some industries. The central government and local authorities are
still debating what kinds of controls will be required and how they will be enforced.
The Council of State recently ruled that authorities can use existing laws to grant operating permits Win: Big projects to factories in Map overseas a choice Ta Phut with previously approved environmental impact assessment (EIA)reports However, Mr Win said the Council of State's ruling was just a short-term solution, while in the long term, there is no guarantee that industrial investments won't face more legal challenges.
"[Activists] threatened to bring the government to court right after the premier gave the go-head to authorities last week to proceed with issuing operating permits [to factories with approved EIAs].In fact, the law gives the authorities the power to do so," Mr Win said.
"I don't think we can take risks doing anything big here in this [unclear] climate."
Mr Win says that Section 67 needs to be rectified since the law now creates two authorised bodies to examine projects.
"There is an independent committee responsible for inspecting EIA reports.Why does the law require one more committee to look after the same issue?If they want to ensure a project's environmental management policy, they should design a single committee that covers the whole thing," he said.
"In my view, the new committee could have more power to abort any projects it wishes to even though the state authorities have already given their approval."
Sahaviriya is the country's biggest hotrolled coil producer. Its subsidiary, Sahaviriya Steel Industries Plc (SSI), also produces cold-rolled coil and other steel products.
SSI closed on Friday on the SET at 0.92 baht, up one satang.
"There's too high a risk for us to invest a lot of money here; we also need to limit our damages. From now on we will invest only in small projects that complement the production lines we already have here, so there will be limited damage if anything happens," he said.
"We would rather invest in massive capital projects overseas."
Sahaviriya recently abandoned a fouryear attempt to develop an upstream steel project and smelter worth 500 billion baht. It had faced strong opposition by environmental activists and communities near the planned site in Prachuap Khiri Khan.
However, the final decision to give up - after 3 billion baht in preparation costs - came after a court in April declared the heavily industrialised Map Ta Phut area of Rayong a pollutioncontrol zone. The ruling called into question a whole range of environmental regulations and put the brakes on hundreds of billions of baht in planned industrial investments.
At issue is the interpretation of Section 67 of the 2007 Constitution, which seeks to protect the public from the harmful effects of some industries. The central government and local authorities are
still debating what kinds of controls will be required and how they will be enforced.
The Council of State recently ruled that authorities can use existing laws to grant operating permits Win: Big projects to factories in Map overseas a choice Ta Phut with previously approved environmental impact assessment (EIA)reports However, Mr Win said the Council of State's ruling was just a short-term solution, while in the long term, there is no guarantee that industrial investments won't face more legal challenges.
"[Activists] threatened to bring the government to court right after the premier gave the go-head to authorities last week to proceed with issuing operating permits [to factories with approved EIAs].In fact, the law gives the authorities the power to do so," Mr Win said.
"I don't think we can take risks doing anything big here in this [unclear] climate."
Mr Win says that Section 67 needs to be rectified since the law now creates two authorised bodies to examine projects.
"There is an independent committee responsible for inspecting EIA reports.Why does the law require one more committee to look after the same issue?If they want to ensure a project's environmental management policy, they should design a single committee that covers the whole thing," he said.
"In my view, the new committee could have more power to abort any projects it wishes to even though the state authorities have already given their approval."
Sahaviriya is the country's biggest hotrolled coil producer. Its subsidiary, Sahaviriya Steel Industries Plc (SSI), also produces cold-rolled coil and other steel products.
SSI closed on Friday on the SET at 0.92 baht, up one satang.
Thursday, August 20, 2009
Steel output hits 2009 peak in July
Global crude steel production dropped over 10% year-on-year in July,but rose to its highest level of 2009 as producers brought back idled capacity on improved demand.
Production for the month was 103.9 million tonnes, down 11.1% compared with July 2008, but up from 99.7 million tonnes in June this year, figures from the World Steel Association showed.
But for the first seven months of the year output remained 19.9% lower at 652.9 million tonnes compared with the same period last year.
Crude steel output in China, the world's biggest producer and consumer of the metal, has bucked the trend and rose by 12.6% in July to 50.7 million tonnes.
This was the first time the country has produced more than 50 million tonnes of steel in a single month, accounting for almost half of the world's total production.
Production for the month was 103.9 million tonnes, down 11.1% compared with July 2008, but up from 99.7 million tonnes in June this year, figures from the World Steel Association showed.
But for the first seven months of the year output remained 19.9% lower at 652.9 million tonnes compared with the same period last year.
Crude steel output in China, the world's biggest producer and consumer of the metal, has bucked the trend and rose by 12.6% in July to 50.7 million tonnes.
This was the first time the country has produced more than 50 million tonnes of steel in a single month, accounting for almost half of the world's total production.
Wednesday, August 19, 2009
VANACHAI NOW EXPECTS POSITIVE GROWTH THIS YEAR
Vanachai Group, a major manufacturer of laminated flooring, has revised its 2009 sales target upward after witnessing signs of a market recovery in the first half.
Assistant marketing director Sittiwat Sahawat yesterday said the group had previously targeted its sales dropping by 10 per cent this year due to the political and economic uncertainties that have hit the country since the final quarter of last year.
"Our customers were quite panicky about the situation and most of them stopped ordering products. It caused our sales of laminated floors to drop dramatically by 30 per cent in the final three months of last year," said Sittiwat, who is the third generation of the Sahawat family that founded Vanachai Group.
"However, we have seen good signs of market recovery since the beginning of this year. There are many ongoing property projects to be further developed this year and that creates strong demand for laminated floors," said Sittiwat.
He added that the company had sold 600,000 square metres of flooring in the first six months of the year, up 10 per cent from the same period last year. It has also achieved extra growth of 5 per cent in the current quarter.
"Encouraged by the results so far this year, we are quite confident of achieving [domestic sales] growth of between 12 per cent and 13 per cent for the year. We also expect a dramatic growth in exports, at about 20 per cent this year," said Sittiwat.
He said the company expected to achieve Bt1.4 billion in sales this year, up from the Bt1.2 billion posted last year. About Bt600 million will be from domestic sales and another Bt800 million from exports to markets including Turkey, Vietnam, Malaysia, Dubai and India. The company exports laminated floors both through original-equipment manufacturing and its own brand.
"We are however still doubtful about the domestic market next year, as no new property projects have been launched. The future is still uncertain," said Sittiwat.
He said that the company would next year increase the ratio of exports from the current 60 per cent to more than 70 per cent as a strategic move to cope with the uncertainty over domestic sales.
The company expects to export to new markets such as the US, as well as paying more attention to existing markets with good potential such as Vietnam and Malaysia.
Vanachai's factory, located in Ban Bung district of Chon Buri, is now running at only 50 per cent of its capacity of 4 million square metres of flooring per annum. The plant is operating on just a two-shift basis for a total of about 16 hours a day.
Assistant marketing director Sittiwat Sahawat yesterday said the group had previously targeted its sales dropping by 10 per cent this year due to the political and economic uncertainties that have hit the country since the final quarter of last year.
"Our customers were quite panicky about the situation and most of them stopped ordering products. It caused our sales of laminated floors to drop dramatically by 30 per cent in the final three months of last year," said Sittiwat, who is the third generation of the Sahawat family that founded Vanachai Group.
"However, we have seen good signs of market recovery since the beginning of this year. There are many ongoing property projects to be further developed this year and that creates strong demand for laminated floors," said Sittiwat.
He added that the company had sold 600,000 square metres of flooring in the first six months of the year, up 10 per cent from the same period last year. It has also achieved extra growth of 5 per cent in the current quarter.
"Encouraged by the results so far this year, we are quite confident of achieving [domestic sales] growth of between 12 per cent and 13 per cent for the year. We also expect a dramatic growth in exports, at about 20 per cent this year," said Sittiwat.
He said the company expected to achieve Bt1.4 billion in sales this year, up from the Bt1.2 billion posted last year. About Bt600 million will be from domestic sales and another Bt800 million from exports to markets including Turkey, Vietnam, Malaysia, Dubai and India. The company exports laminated floors both through original-equipment manufacturing and its own brand.
"We are however still doubtful about the domestic market next year, as no new property projects have been launched. The future is still uncertain," said Sittiwat.
He said that the company would next year increase the ratio of exports from the current 60 per cent to more than 70 per cent as a strategic move to cope with the uncertainty over domestic sales.
The company expects to export to new markets such as the US, as well as paying more attention to existing markets with good potential such as Vietnam and Malaysia.
Vanachai's factory, located in Ban Bung district of Chon Buri, is now running at only 50 per cent of its capacity of 4 million square metres of flooring per annum. The plant is operating on just a two-shift basis for a total of about 16 hours a day.
Tuesday, August 18, 2009
Fortescue strikes deal with China
Australia's Fortescue Metals yesterday unveiled discount iron ore prices for the key Chinese market in return for up to US$6 billion of financing,ending an industry-wide negotiating impasse.
The prices,3% better than those offered by Australian miners to Japan and South Korea, follow weeks of uncertainty caused by China's detention of a senior Rio Tinto executive.
Fortescue said it had agreed to sell iron ore fines - the most commonly traded product - at 94 US cents per dry tonne unit, on condition of completion next month of finance worth $5.5 to $6.0 billion.
"This ground-breaking agreement cements the strength of the bilateral relationship between Australia and China in which mutual issues can be resolved and future opportunities identified," chief executive Andrew Forrest said.
"The ongoing market speculation has promoted unprecedented iron ore and steel price volatility, which in turn has created extreme production uncertainties for Chinese steel mills and for suppliers setting individual contracts with those mills.
"This agreement eliminates that price uncertainty, sets a solid platform for Fortescue to deliver increased product into China and affirms our close working relationship with CISA and all Chinese steel mills."
The China Iron and Steel Association (CISA), quoted by official Chinese media,said the prices were a drop of 35.02%compared with last year. It added that talks with other miners were continuing.
"The result was reasonable, objective and market-based, which shall benefit all parties," CISA vice chairman Liu Zhenjiang said in a statement, calling the deal an "important step."
China's Commerce Ministry welcomed the deal as "positive," spokesman Yao Jian told reporters in Beijing.
Iron ore imports account for about 50% of total consumption in China, the world's leading buyer of the product.
Australian producers and CISA had missed the June 30 deadline in yearly iron ore contract talks as China, the world's biggest steel producer and consumer of iron ore, insisted it should get better prices than other Asian mills.
The negotiations were complicated by the arrest of Rio Tinto executive Stern Hu, an Australian national who was leading the talks, and three of his Chinese colleagues on suspicion of industrial espionage and bribery.
Rio yesterday shrugged off the deal as irrelevant to its own price talks with China.
"We do not see this pricing agreement as relevant to our pricing for fiscal 2009,"a company spokesman told Dow Jones Newswires."Rio Tinto conducts its own negotiations with its customers worldwide. Whether and how other producers reach their own agreements is up to them."
Analysts said Fortescue, Australia's third biggest iron ore exporter, was looking to capitalise on frictions between China and other producers over the contract talks.
"There is no doubt that Fortescue is looking to take advantage of the poor relations that currently exist between BHP and Rio Tinto with the Chinese,"said IG Markets analyst Cameron Peacock.
"Andrew Forrest has obviously been going all-out to present himself as a viable alternative for supply of iron ore to Chinese steel mills and based on the agreement announced today they seem to be taking the bait."
The prices,3% better than those offered by Australian miners to Japan and South Korea, follow weeks of uncertainty caused by China's detention of a senior Rio Tinto executive.
Fortescue said it had agreed to sell iron ore fines - the most commonly traded product - at 94 US cents per dry tonne unit, on condition of completion next month of finance worth $5.5 to $6.0 billion.
"This ground-breaking agreement cements the strength of the bilateral relationship between Australia and China in which mutual issues can be resolved and future opportunities identified," chief executive Andrew Forrest said.
"The ongoing market speculation has promoted unprecedented iron ore and steel price volatility, which in turn has created extreme production uncertainties for Chinese steel mills and for suppliers setting individual contracts with those mills.
"This agreement eliminates that price uncertainty, sets a solid platform for Fortescue to deliver increased product into China and affirms our close working relationship with CISA and all Chinese steel mills."
The China Iron and Steel Association (CISA), quoted by official Chinese media,said the prices were a drop of 35.02%compared with last year. It added that talks with other miners were continuing.
"The result was reasonable, objective and market-based, which shall benefit all parties," CISA vice chairman Liu Zhenjiang said in a statement, calling the deal an "important step."
China's Commerce Ministry welcomed the deal as "positive," spokesman Yao Jian told reporters in Beijing.
Iron ore imports account for about 50% of total consumption in China, the world's leading buyer of the product.
Australian producers and CISA had missed the June 30 deadline in yearly iron ore contract talks as China, the world's biggest steel producer and consumer of iron ore, insisted it should get better prices than other Asian mills.
The negotiations were complicated by the arrest of Rio Tinto executive Stern Hu, an Australian national who was leading the talks, and three of his Chinese colleagues on suspicion of industrial espionage and bribery.
Rio yesterday shrugged off the deal as irrelevant to its own price talks with China.
"We do not see this pricing agreement as relevant to our pricing for fiscal 2009,"a company spokesman told Dow Jones Newswires."Rio Tinto conducts its own negotiations with its customers worldwide. Whether and how other producers reach their own agreements is up to them."
Analysts said Fortescue, Australia's third biggest iron ore exporter, was looking to capitalise on frictions between China and other producers over the contract talks.
"There is no doubt that Fortescue is looking to take advantage of the poor relations that currently exist between BHP and Rio Tinto with the Chinese,"said IG Markets analyst Cameron Peacock.
"Andrew Forrest has obviously been going all-out to present himself as a viable alternative for supply of iron ore to Chinese steel mills and based on the agreement announced today they seem to be taking the bait."
Southern Steel expects September public offering
Steel products trader and manufacturer Southern Steel (2S) will float 60 million shares priced 1.9 baht each in its initial public offering on the Market for Alternative Investment, with the first day of trade scheduled in September.
After the IPO, the company's paidup capital will increase to 200 million baht from 140 million baht, with a par value of one baht per share. Debt-toequity ratio will dilute from 0.63 times to 0.49 times, according to financial data ending June.
Funds raised will be used for business expansion and working capital for materials purchasing to increase bulk orders and improve the delivery process, said director Sangrung Nitipawachon.
Steel prices remain volatile. After dropping to $400 per tonne in the first quarter from last year's peak of $800, the price rebounded to the current $600.
"It's a capital-intensive industry. Cash will allow us to grab low prices to help maintain our margins," he said.
2S is a manufacturer of steel sheets,steel pipes, C-channel pipes and wire mesh. Steel pipes and C-channel pipes contributed about 30-35% each to total revenue, with other products making up the remainder.
President Sombat Leeswadtrakul said the company reported total revenue of 2.8 billion baht last year. In the first half of this year, it recorded a net profit of 50 million baht on revenue of 1.2 billion baht.
This year's total revenue might drop slightly due to softening prices. However,sales volume is likely to increase.2S's net profit margin is targeted at more than 4% after reporting 4.9% in the first quarter, he said.
The company is one of the biggest steel-product manufacturers in the South and Northeast of Thailand, with factories and warehouses located in Songkhla,Surat Thani, and Nakhon Ratchasima.It has almost 400 customers in Thailand and Malaysia.
"We plan to expand more in the Northeast due to its area and population size.The region also has potentially large demand from government projects. The dustless road project, for example, will be able to drive demand for wire mesh,"said Mr Sombat.
Chupong Tanasettakorn, managing director of Country Group Securities,2S's financial adviser, said the share booking date is set from tomorrow to Friday.The price-to-earnings ratio of 1.9 baht per share will not exceed 5 times compared to the MAI's average of 13 times over the last three months.
After the IPO, the company's paidup capital will increase to 200 million baht from 140 million baht, with a par value of one baht per share. Debt-toequity ratio will dilute from 0.63 times to 0.49 times, according to financial data ending June.
Funds raised will be used for business expansion and working capital for materials purchasing to increase bulk orders and improve the delivery process, said director Sangrung Nitipawachon.
Steel prices remain volatile. After dropping to $400 per tonne in the first quarter from last year's peak of $800, the price rebounded to the current $600.
"It's a capital-intensive industry. Cash will allow us to grab low prices to help maintain our margins," he said.
2S is a manufacturer of steel sheets,steel pipes, C-channel pipes and wire mesh. Steel pipes and C-channel pipes contributed about 30-35% each to total revenue, with other products making up the remainder.
President Sombat Leeswadtrakul said the company reported total revenue of 2.8 billion baht last year. In the first half of this year, it recorded a net profit of 50 million baht on revenue of 1.2 billion baht.
This year's total revenue might drop slightly due to softening prices. However,sales volume is likely to increase.2S's net profit margin is targeted at more than 4% after reporting 4.9% in the first quarter, he said.
The company is one of the biggest steel-product manufacturers in the South and Northeast of Thailand, with factories and warehouses located in Songkhla,Surat Thani, and Nakhon Ratchasima.It has almost 400 customers in Thailand and Malaysia.
"We plan to expand more in the Northeast due to its area and population size.The region also has potentially large demand from government projects. The dustless road project, for example, will be able to drive demand for wire mesh,"said Mr Sombat.
Chupong Tanasettakorn, managing director of Country Group Securities,2S's financial adviser, said the share booking date is set from tomorrow to Friday.The price-to-earnings ratio of 1.9 baht per share will not exceed 5 times compared to the MAI's average of 13 times over the last three months.
HomePro gains from renovation demand
Home Product Center Plc, the SET-listed operator of HomePro hardware stores,says the home renovation market remains strong and should help it achieve 10% sales growth target this year in an otherwise vulnerable home-related products market.
President Khunawut Thumpomkul said that since the economic downturn had reduced demand for new homes,the company had seen more customers in the home-improvement market, which now makes up 70% of its sales, up from 40% previously.
"Our shift toward the home renovation market has proved to be a successful strategy," Mr Khunawut said yesterday."There's still a strong demand for homeproduct replacements such as changing carpets, curtains and kitchen fittings."
He said HomePro had about 200,000 members,35% of whom are active customers.
Same-store sales at HomePro in the second quarter rose 7.5% from the same period last year but it saw a contraction in tourist destinations due to the impact of political unrest and the H1N1 flu on travel.
"Our sales in outlets located in beach destinations such as Phuket and Pattaya declined by 5% on average," he said."But growth remains positive since sales in other areas, especially in Bangkok,have not been affected much."
Political and economic concerns this year have prompted HomePro to delay opening two outlets in Nakhon Pathom and Pattaya. It currently has 35 outlets nationwide.
Mr Khunawut said the home products market as well as the tourism industry should pick up in the second half no more negative factors emerge.
The company earlier forecast that Thailand's home-related products market worth 130 billion baht would continue to see declining growth to 5% this year compared with 10-15% during normal times.
HomePro posted 27.68% net profit growth to 493.93 million baht in the first half, on sales totalling 9.681 billion baht,up 11.7% year-on-year. It targets 10%full-year sales growth from 18.54 billion baht last year.
The company projects 1.6 billion baht in sales from its 13th anniversary sale campaign running from Aug 20 until Sept 13 at all its branches. It has invested 50 million baht to stage the event with 300 suppliers offering discounts up to 80%. Bangkok Bank, Citibank and UOB are among financial partners offering discounts to credit cardholders making installment payments.
Shares of HomePro (HMPRO) closed yesterday on the Stock Exchange of Thailand at 6.10 baht, up five satang, in trade worth 2.17 million baht.
President Khunawut Thumpomkul said that since the economic downturn had reduced demand for new homes,the company had seen more customers in the home-improvement market, which now makes up 70% of its sales, up from 40% previously.
"Our shift toward the home renovation market has proved to be a successful strategy," Mr Khunawut said yesterday."There's still a strong demand for homeproduct replacements such as changing carpets, curtains and kitchen fittings."
He said HomePro had about 200,000 members,35% of whom are active customers.
Same-store sales at HomePro in the second quarter rose 7.5% from the same period last year but it saw a contraction in tourist destinations due to the impact of political unrest and the H1N1 flu on travel.
"Our sales in outlets located in beach destinations such as Phuket and Pattaya declined by 5% on average," he said."But growth remains positive since sales in other areas, especially in Bangkok,have not been affected much."
Political and economic concerns this year have prompted HomePro to delay opening two outlets in Nakhon Pathom and Pattaya. It currently has 35 outlets nationwide.
Mr Khunawut said the home products market as well as the tourism industry should pick up in the second half no more negative factors emerge.
The company earlier forecast that Thailand's home-related products market worth 130 billion baht would continue to see declining growth to 5% this year compared with 10-15% during normal times.
HomePro posted 27.68% net profit growth to 493.93 million baht in the first half, on sales totalling 9.681 billion baht,up 11.7% year-on-year. It targets 10%full-year sales growth from 18.54 billion baht last year.
The company projects 1.6 billion baht in sales from its 13th anniversary sale campaign running from Aug 20 until Sept 13 at all its branches. It has invested 50 million baht to stage the event with 300 suppliers offering discounts up to 80%. Bangkok Bank, Citibank and UOB are among financial partners offering discounts to credit cardholders making installment payments.
Shares of HomePro (HMPRO) closed yesterday on the Stock Exchange of Thailand at 6.10 baht, up five satang, in trade worth 2.17 million baht.
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