by DASHVEENJIT KAUR / pic by ARIF KARTONO
CHEMICAL Co of Malaysia Bhd (CCM) is expected to reap significant gains in the next two years, mainly from its RM100 million capacity expansion drive and recent de-gearing exercise.
Group MD Nik Fazila Nik Mohamed Shihabuddin (picture) said the implementation of its transformation strategies will enable the group to expand and strengthen its chemical and polymers businesses, while enhancing operational efficiencies to drive organic growth in the next two years.
“The de-gearing exercise during the financial year ended Dec 31, 2018 (FY18), will also help to create substantial growth and long-term value for our shareholders,” Nik Fazila said in a media briefing in Kuala Lumpur yesterday.
Adding to that, the reactivation of CCM’s Pasir Gudang Plant 1, which is expected to be completed as early as August this year, is set to become the group’s main earnings driver as it increases its total chloralkali production capacity by 50% annually.
“It will also boost the chemical business revenue,” she added.
Current production contributed around 57% of the group’s chemical business revenue, or around RM170 million in FY18.
Furthermore, the recent contract awarded by Petroliam Nasional Bhd to supply 351,000 tonnes of caustic soda for the Refinery and Petrochemical Integrated Development project in Pengerang, Johor, will enable CCM to realise a bigger share of the local caustic soda market.
Nik Fazila noted that it could also maximise the group’s trading opportunities, while advancing its manufacturing capabilities to strengthen the project execution.
The three-year contract commenced on April 15 this year and comes with the option for a one-year extension.
“Through a transformation journey, we have created a more agile organisation with a robust balance sheet which enables us to leverage our competitive edge by optimising innovation to accelerate operational improvement plans, as well as research and development capabilities within the next two years,” Nik Fazila said.
She also emphasised that CCM is cautious of its overall margin as the average caustic soda selling price is expected to remain soft this year compared to 2018.
However, the impact of margin squeeze is expected to be mitigated by higher volume as new capacity comes on-stream.
The average caustic soda selling price, according to Nik Fazila, fell from around US$600 (RM2,514) per tonne in FY18 to around US$400 currently.
“We are not going to enjoy a similar upcycle of caustic soda prices, as we experienced in 2017 and 2018.
“This is due to a softer demand in China, a core consumer of caustic soda, following a temporary shutdown of alumina plants there,” she added.
CCM’s capacity expansion plan includes its polymers business which is advancing well in line with the increasing global demand for gloves and is projected to grow between 8% and 10% per annum over the next two years.
The group also aims to diversify its polymers product portfolio to harness opportunities to drive new growth and revenue streams.
“Besides optimising our existing resources, we are expanding our capacity for Kleeners, a cleaning solution for ceramic formers supplied to glove manufacturers.
“Our new Kleeners facility at a new site in Bangi will provide an additional production capacity of 10,800 tonnes yearly when it is completed by the second half of 2020,” she added.
To recall, during FY18, Kleeners contributed about RM15 million in sales, accounting for 17% of total sales from CCM’s polymers business.