Thai and Malaysia expertise combine in Emery success story
12 Dec 2009 - SELANGOR, MALAYSIA: Local Thai companies that join with leading global players can use Thailand as their production base while creating synergies from the strengths of each partner, a strategy employed successfully by Emery Oleochemicals.
The 50:50 joint venture between PTT Chemical Plc and Malaysia's Sime Darby group has harnessed the strong points of both multinational groups to create a major global producer of oleochemicals from natural oils and fats, with revenues exceeding US$1 billion last year.
Emery said that by investing in various parts of the world including Thailand, it has managed to create a regional base with global reach to bring the maximum benefit to the company.
Apart from Thailand, the company has operations in three other countries: the United States, Malaysia and Germany. All operate independently but after a restructuring they would operate in a more integrated format.
Under the new structure, the Malaysian and Thai companies will work together on business planning with equal authority and seek opportunities across the region together.
Emery Oleochemicals' CEO Kongkrapan Intarajang says the company is looking to invest for sustainable growth by considering market demand. He sees India, China and South America having market potential to support business expansion, although in Thailand the company doesn't have any investment plans yet.
Although the global economy has been in a tailspin, Emery's business has continued to show growth, though it was very small.
"Revenue is projected to grow next year at approximately single digits," he said, adding that the completion of business restructuring would enhance competitiveness while the economic recovery should help lift sales as well.
"Our products are main components in consumer goods and the return of demand for consumer goods after the economic crisis should bode well with us," Dr Kongkrapan said.
Since Sime Darby is the world's largest palm producer, he said the company relied on the Malaysian group for its expertise in the upstream segment, while PTTCH has the necessary downstream expertise in chemical production.
"We hope to be the world leader in value-added natural-based chemicals by combining expertise and synergies in plantations, oleochemicals and petrochemicals together," he said.
Sime Darby accounts for about 6% of global palm oil production while PTTCH is a fully integrated producer and distributor of chemicals, the third largest olefins producers in Asia and Thailand's largest chemical company.
Emery classifies its products into two categories: oleo basics making up 74% of sales and specialty derivatives the rest.
Dr Kongkrapan said that amid strong competition in fatty acids and other oleo substances, the company would focus to expand specialty products because of their higher value added.
"In the commodity market, fatty acid is oversupplied due to the entry of new capacity, especially in Asia where the market is quite competitive," he said. "In addition, price pressure is the other impact from the current market situation.
"Consequently, the company will increase sales of specialty products with a sales proportion of up to 30% of our total to avoid price pressure in oleo basic products."
Currently, the company operates plants in the US, Germany and Malaysia and also has service centers across the world. It derives 43% of its sales from Europe, 30% from North America and 27% from Asia.
Dr Kongkrapan said, however, that demand in the United States seemed to be mature while the potential growth is in Asia and South America, especially for health-care products.
While current demand is not at the levels seen before the economic crisis, the company hopes it will recover soon.
"In the long term, we are still looking to invest in potential markets such as China, India and South America which will generate sustainable growth to the company," he said.
He said plastic additives were a high-potential product group with good demand growth, and Emery expected to start making the products commercially at a new plant in 2011.
"Construction is starting to return, especially in China and India, so high demand is there."
Palm oil prices don't have much impact on the company because it utilizes oil from kernels, which has higher value and lower price volatility than seed oil.
In addition, the company is looking to expand in the health-care, pharmaceutical and food industries by providing premium-grade products for which it can charge more, reducing the impact from price wars in the world market.
"Taking these factors into account, we are sure to see growth in our portfolio and maintain our leading position among oleochemical producers in the future as well," he said.