In the News: 2007

Acquisition to boost SAT margin

Bangkok Post
2 June 2007

Somboon Advance Technology Plc (SAT), a SET-listed auto parts maker, expects its gross margin to rise to 21% this year from 18.9% last year, driven by cost reductions after a steel mill acquisition, says president Verayut Kitaphanich.
 
SAT recently took over a mill worth 200 million baht from a local operator.

"Previously we had to hire a steel mill to process our raw materials, but now we operate the steel mill ourselves. Apart from saving costs from that process, it may help boost up our revenue," he said yesterday.

The company hopes its gross margin will increase from the new acquisition starting in the third quarter this year. As well, expansion will increase capacity to about 2,000 tonnes per month from 800 tonnes earlier.

Mr Verayut said the company had orders on hand for 2,850 tonnes. This will bring the company's balance sheet into the black for the first time since it started operations two years ago.

Due to expansion, SAT's capital expenses this year could rise to 500-550 million baht. About 300 million baht would go to upgrading production facilities.

The company expects its revenue to grow by 10% this year from 4.25 billion baht last year. That's higher than the 8% growth of the local automotive industry, as exports could offset a domestic decline.

Automobile exports this year are projected to rise 11% to 600,000 units from 538,000 units last year. SAT's first-quarter revenue was 1.17 billion baht, with net profit of 139.2 million baht.

The second quarter will likely be on par with the first quarter. Imported raw material prices have dropped, though, due to the stronger baht.

SAT has new purchasing contracts worth 1.5 billion baht, and will realise revenue from them over the next six years. It already had another one billion baht in contracts that will be realised over four years starting from 2008.

Delays in negotiations with a Japanese customer to produce assembly modules would not affect its revenue projection, Mr Verayut added. But if the deal goes through, the company's revenue would increase by 1.2 billion baht per year for seven consecutive years.

SAT shares closed yesterday on the SET at 11.40 baht, up 20 satang.