By Nareerat Wiriyapong

It took five years and five staff of SCG Paper to develop a new breed of
eucalyptus that can survive in dry weather and is strong enough to battle
diseases.
The innovation team of SCG Paper, Southeast Asia's largest paper producer,
called their brainchild a hybrid eucalyptus. It was inspired by customers'
requirements but it will also mean higher margins for the company.

Like other genetically modified farm products, the hybrid eucalyptus was
created in a bid to resist climate conditions and endemic diseases, allowing
farmers to use fewer chemicals while earning more income from higher yields.

The new variety won one of two outstanding innovative product awards in the
SCG Power of Innovation Awards 2008. The contest, now in its third year, is
a part of Siam Cement Group's (SCG) efforts to strengthen its innovations in
products, manufacturing processes and services.

Chaovalit Ekabut, the president of SCG Paper, one of the conglomerate's core
businesses, said innovation was critical for the group, especially when
margins have shrunk because of rising costs while competition has
intensified.

"We are limited in raising our product prices to recover higher costs
because of fierce competition in the market," said Mr Chaovalit.

"Profit margins are falling, prompting us to try to add value to our
products and differentiate them from those of our competitors."

A few SCG innovations have been commercialised, such as the "eye-friendly"
paper that features less glare and has become popular among pocket book
publishers, said Mr Chaovalit.

The "Green Read" paper is 15% more popular than normal printing paper.

Another outstanding innovative product is SCG Cement's CPAC agricultural
drying-yard concrete, which helps shorten the period of drying agricultural
products in the field. Consequently, farmers will get more dried products
that can be forwarded to the next process even faster.

SCG, Thailand's biggest industrial conglomerate with sales of 267.7 billion
baht in 2007, last week announced its five-year investment of six billion
baht from this year to 2012 to support its innovation strategies including
budgets for R&D and intellectual property (IP) management.

"We have doubled our R&D spending every year for the past three to four
years," said president and chief executive Kan Trakulhoon.

"To be a regional leader, we have to have our own technologies. We can not
just follow others in the industries we are operating in."

The number of in-house researchers has tripled to 300, including more than
20 doctorate holders, Mr Kan said.

Citing the substantial investment in innovation, Mr Kan said SCG definitely
aimed for reasonable financial returns.

"This kind of investment could bring about a return of 15% EBITDA (earnings
before interest, taxes, depreciation and amortisation) on investment," he
said.

"On top of that, we gain a good reputation from investing more than one
billion baht annually on innovations."
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