Good afternoon, ladies and gentlemen. We are delighted to welcome you again to the analyst conference in the second quarter. Today, we will cover the performance of the first half and also the second quarter of this year. My name is Sornnarin Bangkedphol from the IR team, and I will be your host on this afternoon's session. As usual, we will start with the presentation by the management, and we will have the Q&A session right after. Please allow me to introduce and hand over the floor to SCGP CEO, Khun Wichan Jitpukdee, and SCGP CFO, Danaidej Ketsuwan . Thank you.
Good afternoon and sawasdee kap. Time flies so fast this time. So we meet again for the second quarter of 2025, and the first half of the year 2025 operating results. Situations have been changing and instabilities. U.S. tariff for Thailand, we are still waiting for the figure number from the U.S. And also geopolitical tensions also increasing. Good news that both parties are now cease fire and start peace talk since this morning. So we wish that the situation will be calmed down and both sides can discuss and continue to be a friendship and good country friend altogether. Even the situation that U.S. tariff and the geopolitical tension, SCGP also focus in three main objectives, same as the first quarter of this year. First one, we focus on the cash generation. Second, we also focus on the customer centric, and also we expand for the consumer- linked.
We believe that whatever the situation is, the consumer- linked will continue to grow in this development world. Third, SCG make the business more flexibility of the supply chain, so we can do supply chain relocation among this, especially Thai, Vietnam, and Indonesia. With that, may I start with the consolidated key financial performance of the first half of this year. First half of this year, sale revenue are THB 63.7 billion , which reduced 6% year-on-year and 1% compared to second half of last year, with the cost of goods sold reduced from 85% to 82%. Revenue decline year-on-year, primarily from the weaker selling price of the Integrated Packaging Business and also Fibrous Business, in line with the regional market trend. However, first half of this year compared to second half of last year, revenue slightly decreased. This is because of the sale volume has been increased.
The selling price also dropped, but the sale volume increased to help to lessen that impact to the revenue from sale. In terms of EBITDA, EBITDA are THB 8.49 billion , which improved 34% compared to second half of last year. This is the significant improvement, especially for the EBITDA margin, up from 10% to 13%. Net profit also the same. This first half, we released the profit THB 1.9 billion , which very much improved from the second half of last year, which lead to the profit margin at 3%, come close to the figure that we used to achieve in the past. EBITDA and profit are dropped year-on-year, reflecting the revenue decline. However, the first half compared to the half of last year, profitability increased from the raw material and also energy costs saving.
On top of that, as we see on the figure, most of this one also contribute from Fajar, which they improved the Indonesia operation. In terms of the business segment, we see that the Integrated Packaging Business margin stay really resilient due to volume growth in the consumer packaging along with the effective cost management. We see here the Integrated Packaging Business, the EBITDA are THB 7.3 billion, which are EBITDA margin 15%, which improved by 28% compared second half of last year. For the Fibrous Business, profitability declined from the downward trend of the selling price across all the product category, which lead to the EBITDA THB 1.17 billion, reduced 10% compared to the second half of last year and lead to the EBITDA margin at 9%. With that, the business portfolio, we see from left-hand side, revenue from sale by business unit.
We see here consumer packaging expand to 46%, up from 44% last time. This due to the volume growth in healthcare supply, polymer, and foodservice packaging. While the packaging paper decline. Actually, packaging paper decline, the domestic in ASEAN improved a lot, but the export to China has been reduced. All in all, total, we just reduced a little compared to total market. In terms of the revenue from sale by end destination, we see Thailand improve from 42% to 44%. Once again, the reason because of reduce the export to China, and we can grow the domestic market in Thailand. On top of that, the export outside this region, outside our area of doing the business, down from 17% to 16%.
This contribution by the export to China also has been reduced to only 5% compared to the past 8%, 7%, 6%, and now down to 5%. Export to U.S. still maintain at roughly 3%-4% of our portfolio. In terms of the market movement, we can see that the PMI here, the global economy continue to grow because so in the moderate rate, because of the U.S. PMI improved in the past three months. While the China and Thailand, the figure above of 50%. This show the size of recovery. However, the instability due to the U.S. tariff still there. We hopefully by end of this week, all the figure from all country will be released from the U.S. and the latest news we see that there might be a range of between 15%-20%.
In term of the export, all the country has been improved from QoQ. Thailand 5%, Indonesia 2% because of in the second quarter they have a long holiday. Vietnam also improved 13%, China 12%. This improved a lot, meaning the growth in the domestic. Of course, this small portion come from the front load to U.S. But our observation is it is not much for the front load. In terms of the consumer price index, Thailand has been reduced and negative. We are quite confident that the inflation is not so high and hopefully the Bank of Thailand will reduce the interest rate. For Vietnam and Indonesia, in the past six months, their CPI quite stable. With that, Indonesia Central Bank also reduced the interest rate. That will be the key figure.
However, for Thailand, the instability of the political source will be the key challenge for us. This will be key to effect of the FDI to Thailand. For the detail of our business review and segmentation for the second quarter, may I ask Khun Danaidej to present and explain in further detail, please.
If we look at the chart on the left, we can see that for most of the economies you will see the green arrows pointing up. It means the demand has been growing in terms of year-on-year and QoQ on most of them. That is part of the good news. For Thailand, maybe not growing, but it is actually not a very bad second quarter at all. Because if you look into normally, the second quarter would be less than the first quarter. But for this year, the second quarter and first quarter was quite similar, even though we have Songkran holidays during that period too. But if we talk about year-on-year, last year in the second quarter in Thailand was particularly good. So this year was not bad, but it is not as good as last time. Demand dropped only slightly in the second quarter.
Now if we look into each segment, starting from the consumer- linked fiber and polymer packaging. In terms of consumer staple, we continue to see resilient domestic consumptions, and that is a part that drive all the demand in most of the ASEAN countries. In term of the export, some segment benefit from the tariff pause, let us say the suspension or the waiting period, particularly in the package and produce food that has an extra volume of export in that category. For the consumer discretionary, the momentum for export continue for things like footwear and computer and electronic parts to take advantage of the similar window for tariff. But in term of domestic consumption in the consumer discretionary is still not very strong, and that is constrained by the consumer purchasing power because of the higher household debt that we have.
With this, it also has the implication on the packaging paper in that there is a strong domestic demand, as you can see from the rise in domestic volume as well, particularly Indonesia and in Vietnam. For the export market, if you talk about China in term of containerboard, there was a slowdown in term of the export to China, or in other words, the import of China in this product category actually reduced because they rely more on domestic production. For foodservice packaging, it was overall very good in term of volume. For the QSR fast food segment in Asia, they have promotional items, so there is a growth in the foodservice packaging as well as the retail items selling in Europe because of the summer months is the peak season for this type of packaging as well.
For pulp, the demand was rather weak because of the dissolving pulp linked to the slowdown in the garment and textile segment. Also there was an overall decline in the pulp price in the global market. That contributed to the decline in terms of the pulp segment. Next we will talk about the quarterly financials. First look at the revenue. We locked in at THB 31.5 billion for the second quarter. That is a drop year-on-year, mainly because of the price factor. In terms of volume, year-on-year volume rose, but because of the price drop, that contributed to the revenue drop. In terms of QoQ, the revenue dropped slightly also. We have a drop in volume, mainly in relation to the Fibrous Business, whereas the price is relatively flat across all of the segments.
That contributed to a small decline in terms of quarterly revenue. EBITDA was THB 4.2 billion, and that is a drop year-on-year in line with the revenue. But in terms of QoQ, we have a slight improvement at 1%, despite the fact that the volume declined QoQ, cost elements also declined. That gave us a better margin to give us better EBITDA in the second quarter. With that, our net profit for the second quarter was THB 1 billion, THB 1,010 million to be exact. That is in line with EBITDA. Now it is increasing from the last quarter, which was THB 900 million. That is the overall quarterly performance of the SCGP. Now I would like to go into detail of each business chain, starting with the Integrated Packaging.
Revenue was roughly THB 44 billion, and that is a drop year-on-year, mainly because of the price factor. QoQ also a slight decline, relatively flat, but if we break down into each segment, we will see that the polymer packaging actually saw the growth in terms of revenue because of the growth in volume, whereas the price remained quite flat. The volume growth is supported by the domestic consumption and also part of the export market, as I explained earlier. In terms of medical supplies and labware, also showed improvement in this quarter. For fiber packaging or box business, revenue was resilient, relatively flat because we have both price and volume are similar to Q1. We have the demand partially driven by the demand growth in the consumer-linked segment in Vietnam and Indonesia, whereas in Thailand, we have a holiday season, so a bit lower.
Packaging paper revenue slightly declined, and that is because of the volume in the export market that was lower than the first quarter, whereas our domestic volume actually increased. Price overall dropped slightly, but in Indonesia we have an increase in price of about 2% QoQ. With this for the whole chain, the EBITDA was THB 3.8 billion, and that is an increase both in terms of year-on-year and QoQ. The reason is because we shifted to more domestic markets, domestic volume, so that gave us a better margin, and also our cost, whether RCP or energy cost, was in a better position. That contributed to expand margin in the second quarter. QoQ as well, we have an EBITDA which is positive for Fajar operation in the second quarter of this year. I will expand on that later.
Next would be the Fibrous Business. For fibers, revenue was THB 5.9 billion. It is a drop both year-on-year and QoQ and mainly involved the pulp and paper operation, which we see lower volume and also lower selling price. Similar in term of QoQ. For foodservice packaging, however, QoQ revenue increased, and that is because of the higher volume, both in term of our QSR or fast food segment in Asia, as well as our retail sales in Europe. So those increase in volume contribute to a higher revenue in the foodservice packaging segment. But on the paper segment, the revenue declined because of the drop in volume because the customers are managing their inventory level as well as in term of the difficulty or limited vessel availability. Please note that part of these paper products are sold in the export market.
The export volume overall is challenged. The price in paper is stable QoQ. Moving to pulp. We see the reduction in the pulp revenue because of both volume and price. There was a decrease in volume in dissolving pulp as well as in the short-fiber pulp. And the selling price remain relatively weak because of lower demand in the textile and the garment segment. With those reason, we see that the EBITDA for the Fibrous Business stayed at about THB 446 million, and that is a significant drop from a year earlier as well as from the last quarter. And this is the effect in term of both price volume as well as in term of the Thai Baht appreciation, which reduce our income and margin. Our margin for the Fibrous Business stays at about 8% in the last quarter.
That is the review of our financial performance in the second quarter. Next, to reconcile the core profit and net profit, you can see that the special items, one is the FX gain on loans, which you have about THB 45 million, partially offset by the issue of expense in relation to the acquisition of additional shares in Duy Tan. But that is not much when we net together, so our net profit stays at THB 1.01 billion. Next will be on our balance sheet items. Our net debt in June would be THB 55 billion. And that is a slight increase from the end of the year, mainly because of the investment, CapEx on additional shares in Duy Tan.
In term of net debt-to-EBITDA in the second quarter, we are at 3.7x , which I would say would be at the peak already because of course it increased from the last period because of the CapEx we have, but also because when we calculate our EBITDA, we use the last 12 month, and the last half of last year was particularly challenged in terms of our EBITDA. It was lower than normal. And right now, the last 12 months will include Q2 of this year in replacement of Q2 of last year, which our EBITDA was lower this year than last year. So that contribute to the rise in this net debt-to-EBITDA .
But we project that with the better EBITDA year-on-year of the second half of this year, we should have this net debt-to-EBITDA coming down to the level of 3.3x by the end of the year. The CapEx that we had in the first half was THB 6 billion, and about THB 4 billion of that is growth CapEx, mainly for the Duy Tan acquisition. So the budget for the year is about THB 10 billion, and that was revised down from the THB 13 billion. We see we have an opportunity for additional M&A this year, at least one. But another deal that we're working on probably shift to early next year. So we have maybe one, most likely one the remaining of this year and maybe one early next year.
So that's why we shift some of the CapEx from the earlier THB 13 billion to be THB 10 billion this year, and it will be top up for next year instead. Today also, the board has approved the interim dividend at THB 0.25 per share to be payable in August. Next will be business update. Let me start with the situation in Indonesia in Fajar. As you can see, we are actually exceeded breakeven in term of EBITDA. The reason you can see from the first chart on the left, that the blue bar represent our domestic sales volume, and it has been increasing for the past year quarter-on-quarter. So we have increased our domestic sales portion. Particularly in the last quarter, the second quarter, the domestic sales actually increased about 11% year-on-year.
Which matched with the, if you see the chart on the right, you see that our market share also has been increasing since 2024, increasing in Q1 of this year and also in Q2. So now our market share stands at about 32% for Fajar. So our domestic focus actually pays off. The export volume dropped, and you can see the orange portion on that chart is actually getting smaller. That's intentional as we decouple from the China market because the price and the volume in China is particularly weak. So we are serving in a different alternative market instead. So overall, the volume was down QoQ, but the domestic volume was significantly up. In term of price, it was up 2% QoQ. So with this, the revenue QoQ were relatively flat.
But in term of EBITDA, Fajar achieved EBITDA of IDR 31 billion in the last quarter. So that's a mix of higher domestic portion, which give us a better domestic margin. Also, the price increase that was factored in and also a better cost position, more in term of SCGP as well as in energy cost that was reduced from the earlier quarter. Another point to note is that our capital increase exercise through rights issue was completed, so all the funds are in Fajar and also used to repay the expensive banks loan. So we actually reduced our net debt- to- equity of Fajar to about 1x as we communicated earlier. The interest cost savings at Fajar level will be roughly about THB 450 million a year.
If you factor in the cost of SCGP, the total SCGP interest saving for the entire year would be about THB 320 million . Half of that will be occurring already in this second half of this year. That is a big savings. Next, I would update on the Duy Tan acquisition, which we increased our stake from 70% to 100% by acquiring additional 30% shares. Duy Tan is a leading rigid packaging producer in Vietnam. The main reason we want to increase our exposure or increasing our investment in this company is because first of all, it is a very much consumer- linked business. If you look at the Duy Tan portfolio, they have B2B portfolio, which the packaging is sold to our brand customers or brand owners, which are consumer products. They are very close to the consumer.
They also have their own consumer products such as plastic containers you can see in the picture. Sorry about that. The second reason is that polymer packaging give us a superior margin at roughly about 18%-20% EBITDA margin. We want to increase this portion. Another point is Vietnam is a country of growth. We see growth about 5% annually every year. We want to increase our exposure in this market. That is the reason we increase our stake in Duy Tan. As you can see in the table, the net profit is at about THB 800 million last year. That represent about 8%-12% net profit margin, very healthy. That is the reason. The next one would be the long-term reason why we want to increase our share in Duy Tan. We want to rebuild our polymer packaging business.
Right now it consists of about 13% when we consider polymer together with healthcare. With our additional investment, our plan to expand both organically and also M&P, we expect it to increase to about 15% next year. In the long term, we want to build our what we call the consumer- linked portfolio part to grow from the current 46% to about 50% in 2030. Polymer and healthcare is part of that portfolio. Also, we want to expand our portfolio outside of Thailand. Our outside Thailand revenue, mainly in ASEAN, would increase from 56% at present to about 2/3 of our business by 2030. Our consumer- linked portfolio in total would be about 75%. That is our aim and our rationale for investing further in Duy Tan. Another point I want to mention is in term of the ESG.
We also commit and continue to progress on this front. In term of Carbon Footprint of Products, we currently covers about 50% of our products already. That give our customer the confidence of knowing what kind of Carbon Footprint of Products when they purchase from us. We plan to reach full coverage of all of our products by the end of this year. Another one is on the EcoVadis, which we achieve Platinum level for the second consecutive years staying at a 99th percentile for our category. Those are two achievement to emphasize our commitment to ESG. Next would be Wichan.
Thank you for a very well presentation and reporting. For key takeaway and the outlook, may I start with the U.S. tariff progress update. For the detail, I am not going in detail because last quarter, we already discussed in the detail of the mitigation plan. For this quarter, we will report the progress that we already explained in the first quarter. Before we present that, we see that the tariff from the U.K. 10%, Europe just concluded the day before yesterday of 15%, Vietnam 20%, Philippines and Indonesia 19%. We see this figure is quite a good number. We are just waiting for Thailand to release. We hope for the best that Thailand will be between 15%-20%. We see the opportunity now that Vietnam, Indo, Philippines still remain very competitive among the ASEAN country. As Khun Danaidej mentioned, Fajar, we laid down the foundation.
We have been put a lot of effort to our chain of product category. We have to stop and cancel some product and lay down product that be competitive and suit for Indonesia market. For the challenging Thailand operation, we still export competitiveness. The FDI will be the pressure because the tariff is not concluded yet. Going to right hand side about the progress. For the second quarter, the ASEAN revenue improved 5% QoQ compared to the first quarter. The first quarter, the domestic 80%, export 20%. However, for the second quarter, export down to 17% and the domestic 83%. That concluded the ASEAN revenue improved 5% QoQ. This due to the intentional, and we want to lose coupling from China. Of course, China will be our market, but we do not tie coupling to China as in the past.
In term of in Europe, we do order allocation between Thai and Vietnam right now to support our foodservice packaging. We aimed already commercial last year, and the new line will be commissioning in December this year, and hopefully it will started up in January next year. The most important on this progress update of the tariff is about the cost reduction and improve the operational efficiency. In the first half of this year, we do the cost reduction THB 390 million . With the detail of this THB 390 million, THB 120 million is come from using the AI. We put the AI and machine learning in term of the across of the value chain here in the production process, in the power plant also. With this, we are very confident that we can enhance our organizational competitiveness.
We also start to roll out to Vietnam, Indonesia, and the Philippines. When we start to use AI, it is not to use immediately. We have to lay down the foundation sensors, and also we call the Plant Information Management System. When we get all that information, then we can do optimization. The use case of the AI starts from safety. In manufacturing, the safety of employees is so important that early we are also using AI in terms of safety. Next is about cost reduction. Fiber yield optimization, because we do import 40% of the RCP from outside the ASEAN. Using every single piece of the fiber turns into a benefit to us in terms of yield improvement, and at the end, it comes back to cost reduction. We also do spare part inventory optimization with AI. Optimization and machine learning help a lot for cost reduction.
In terms of quality improvement and data management, we have the quality monitoring dashboard. This will show the quality monitoring dashboard instead of putting it into the paper. When we monitor, we can control easily. On top of that, SCGP AI chatbot for the employee. This is about what we call knowledge management. In terms of the maintenance people or the operators who control the operation, when they want to know something, we put all the knowledge management, we call the SCGP AI chatbot. On top of that, the plant reliability with the advanced predictive. At the beginning of this year, I mentioned that we do the quality prediction of the paper quality, and now we improved into another area we call abnormality detection platform.
This platform helps to detect the abnormality of the machine, so the operator who controls the machine can know early warning of the abnormality of that machine. Last but not least, energy efficiency with the real-time monitoring control and steam reduction here. That can reduce energy consumption and help to reduce costs. Once again, the value release from the first half of this year, we released THB 120 million, and we are set to expand to Vietnam, Indonesia, and the Philippines. Heading towards the second half of this year, we see that the transformative transformation that we mentioned two years ago, we want to diversify and tap into the ASEAN market because of the really uncertain and instability, especially for geopolitical. So focusing on ASEAN and relying less on those exports, especially China, will help a lot. We will be scaling our consumer packaging business.
As Khun Danaidej mentioned, hopefully by end of this year, we can include one deal for the consumer packaging business. In terms of the market, we want to expand solutions and services cross-selling. Start from end of this year, the cross-selling among the fiber packaging and the polymer packaging will continue a lot and gain any existing customer. As we mentioned earlier, we focus on customer centricity and also consumer- linked. By this, once again, we are on the restructure of the segmentation and market. Hopefully in the next quarter, I will report on the progress of the market that we are restructuring to suit the new future of doing consumer packaging. In terms of the organization, beginning of this year, we do so-called decentralized. We do empower and delegation, so each country, they are more free to decide to manage their own.
However, for the technical expert, we do use Thailand as a center. By this way, we have made our organization more efficient. In terms of the trade uncertainty and economic challenge, ASEAN is still very resilient performance as proved by this second quarter. We hope that the China stimulation package will help to boost up China, and that will increase the regional price of the packaging. Last but not least, inflation still remains as the CPI, as mentioned. Thailand will reduce a bit, while Indonesia and Vietnam are quite stable. This aligns with the central bank of these three countries, and hope that they will reduce the interest rate for the third and fourth quarter respectively. That is all for the second quarter and the summary of the first half of the year 2025.
From all of the participants today, so it should be that case.
I believe that would be the conclusion of our virtual conference today. If you have any questions or further inquiries, please kindly contact the IR team. We would like to thank all participants for joining the conference today. We look forward to seeing you again next quarter. Today, thank you and sawasdee kap .
Sawasdee kap .