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Renewal in specialities

June 17, 2015   – (Interview: Speciality Chemicals) – This is the 175th year of Emery Oleochemicals‘ existence. For newly appointed group CEO Ramesh Kana, however, 2015 is a key year in the continuation of a new journey that will see the firm transformed from a mainly commodity producer to a speciality chemicals firm.

Founded in 1840, the Emery Candle Company was originally a tallow and candle producer that was based on the same site in Cincinnati as the early Procter & Gamble (P&G). Both are still there and Emery Oleochemicals still supplies to P&G but now it has grown through the manufacture of fatty acids to become one of the world‘s largest natural chemicals players. It is headquartered in Shah Alam, Malaysia, with other facilities at Telok Panglima Garang in Malaysia and at both Düsseldorf and Loxstedt, near Bremen, in Germany.

Kana himself is as cosmopolitan as the company he now heads. Malaysian by birth, he emigrated to Australia as a teenager and spent much of his career with Shell, working on almost every continent, mainly in finance, M&A and strategy roles. He later left Shell to return to Australia and work for an investment bank "because I wanted to be a bigger cog in a smaller wheel". It was here, through building a business that converted waste gas to energy in South Africa that he developed an interest in sustainability and saw that it was possible to make money being ‘green‘.

In 2009, Kana was headhunted by Emery to become its CFO and has now become group CEO, succeeding Dr Kongkrapan Intarajang, who has returned to a new role at the company‘s co-owner, PTT Global Chemicals, which is the chemical flagship of the PTT Group, Thailand‘s national energy and gas company; the other co-owner is Malaysian plantation owner Sime Darby Plantation.

"Emery is in transition from being a commodity chemical manufacturer to playing further downstream in speciality chemicals," Kana says. "Our top line will probably go down as a result, but we expect our bottom line to grow." This transition he views as his main challenge as CEO. There are two main aspects to it.

The first is the simpler one of building new speciality capacities and capabilities. Five major investments have been made or are being made around the world. Most notably, a new $50 million facility for the manufacture of biobased, recyclable polyols in Cincinnati reached mechanical completion at the end of 2014 and was expected to be fully commissioned within Q2.

In addition, a multi-purpose reactor for liquid and solid esters for applications in plastic additives and lubricants has been at Loxstedt and further debottlenecking there is taking place to address growing demand. A new multi-purpose reactor for solid esters and a sulphate plant are both planned at Telok Panglima Garang.

The harder part of the transition, Kana agrees, will be the people aspect. Employees will need to change from selling on price to value and helping customers on getting better downstream products from the molecules they buy. The key to achieving this will be on a globally-based applications development group, which will treble in size from the current 40 to about 120.

In market terms, the focus for the transition will be on the three of Emery‘s six business units where it believes it already has a competitive advantage through customer intimacy and being involved in planning with them for years ahead. These are Bio-Lubricants, Green Polymer Additives and Eco-Friendly Polyols.

"We don‘t have to push renewables in these areas and there is no premium for them. Customers want to buy RSPO-certified products," Kana says. "What we have also seen is that now, when the oil price has fallen and petrochemical-based alternatives are more competitive, customers are not switching. Once you have promoted the green agenda in this way, it is hard to switch back."

Of Emery‘s other three business units, OleoBasics is essentially about commodities, while Agro Green is the youngest and smallest. Emery has filed some patents in the agro field, notably palm-based herbicides and products that are mixed with herbicides to reduce water consumption in rice-growing. These are rather niche, however, and Emery cannot compete with the agrochemical giants, so its strategy will be to collaborate with others in future product development.

The last business unit is Home & Personal Wellness. Although personal care is a major consumer of palm oil, this business requires a different approach. A combination of an oversupply of fatty alcohols and Malaysian tax policy has made this market an outlet for the supply of cheap fatty alcohols with little added value. As such, it is relatively unattractive for a company like Emery that is not back-integrated into feedstock.

The recent sale of the ERCA Surfactant facility in Moerdijk, Netherlands, was a consequence of this situation, Kana adds. Emery bought into this facility to bring in fatty alcohols from Asia for ethoxylation, but when fatty alcohols went long the product out of the facility became totally commoditized and it was divested to Solvay, who can use it captively.

Kana is a strong advocate of sustainability. He notes the saying that the real test is "what we do when no-one is looking". Publishing a report on it is fine and Emery has just done so, even though as a private company it is not obliged to, but companies need to do more than this. Sustainability, he believes, is about more than good governance, it also needs to become a way of life, something that is simply done rather than debated.

On the feedstock side, Emery traces all of its palm oil back to the plantation; Sime Darby is the world‘s largest supplier of certified sustainable palm oil and palm kernel oil. The company received its RSPO Supply Chain Certification in 2013 and the Telok Panglima Garang and Düsseldorf sites are both accredited. As of last November, Emergy is offering the Emercol* series of RSPO segregated and mass balance-certified fatty alcohols for multiple applications.

(It is worth noting, however, that palm amounts to only about 30% of Emery‘s global feedstocks, which vary by location. For the Malaysian plants, the source of raw materials is 100% palm but in the US it is 100% tallow; the German plants consume 50% tallow and a mixture of palm, coconut, canola and other oils.)

In five years‘ time, Kana believes, Emery will be mostly a speciality chemicals firm. It will not move further downstream and sell directly to customers, however; it will remain firmly in the B2B space. It will also continue to advance capabilities it believes to be unique in ozone technology for the manufacture of pelargonic acids.

In terms of other technology advances, great potential is envisaged for the Infigreen technology for the recycling of old polyol-based foams that Emery has just acquired and scaled up. The use of recycled foams is mandated in the US automotive industry and the new plant is expected to be fully accredited in 18 months. In the longer term, Kana sees possibilities for a similar plant in Japan or elsewhere.

Another in the pipeline is based on work Emery has done with Platinum Nanochemicals to develop a drilling mud for oilfield applications based on its palm-based esters and carbon nanotubes. This, he says, offers significantly improved lubrication and viscosity to existing products and is also 97% biodegradable. Trials are about to start with an unnamed partner.

"The next two years should be exciting as the new plants come onstream," Kana concludes. "We may look at specific acquisitions, though probably not this year, with a view to gaining more people and technology capabilities rather than just more market share."

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