SLP (7248) - Plans to produce more
December 29, 2014
DESPITE tumbling polyethylene resin (PE) prices, the local food and beverage industry in the country is consuming less plastic packaging materials, as buyers are waiting for resin prices to drop even lower.
Kelvin Khaw, managing director of Penang-based SLP Resources Bhd, said the selling price of PE had dropped to about US$1,350 (RM4,718) to US$1,400 per tonne presently, from US$1,600 per tonne early this year.
“We will soon readjust the prices of our packaging materials to about RM6.70 per kg, down about 5% from RM7 per kg.
“But this does not mean that the lower pricing will attract domestic buyers as they will want to wait for prices to decline further.
“They are different from our foreign customers in Japan, Australia, and New Zealand, who will stock up their inventory when the price goes down,” Khaw said.
Orders from the domestic market declined by about 15% in the fourth quarter compared to the same period a year ago.
But because domestic sales for the first three quarters of this year have been stable, the domestic contribution to SLP’s revenue is expected to be around 53% this year, compared with 56% in the same period a year ago.
However, despite the drop in domestic demand, SLP is on target to achieve about RM176mil in sales this year, just 2% short off its RM180mil revenue target.
From January to November this year, the company recorded sales of RM162mil.
“We only have one more order of about RM14mil to deliver before the end of the year,” he said.
He said most of the company’s orders came from Japan, Australia and New Zealand.
“Customers overseas are buying more from Malaysia because our competitors in China are no longer able to produce cheap plastic packaging with consistent quality.
“Due to rising production costs, the prices of plastic packaging materials from China, for example, are almost the same as what we charge,” Khaw said.
Moving forward, SLP is planning to increase its production.
The company is spending RM6mil next year for another production line to raise its monthly production capacity by 6% from 2,600 tonnes presently.
The new production line will be used to produce more thin-gauge packaging materials under the company’s product brand Maxinflax. SLP also intends to develop innovative plastic-based consumer products.
“However, we expect the revenue to drop slightly next year as the price of PE resin is projected to dip further.
“The net margin will be maintained due to the production of more value-added thin-gauge packaging materials, which requires the use of less raw materials, saving us on material cost.
“Thin-gauge packaging materials presently comprise around 15% or 400 tonnes of our monthly production, but this will increase to 20% or 550 tonnes monthly,” he said.
On its future products, Khaw said the group had invested RM2.5mil to develop the world’s first anti-bacterial sleeve to be used as a cover for door handles.
“The purpose of the product is to minimise cross contamination to promote personal hygiene.
“We have completed the development of the product and are now waiting for the right time to commence mass production, as the global economy has yet to recover fully,” he said
Khaw said global PE resin prices would weaken further due to the weak demand from China.
“China is now using coal-to-olefin (CTO) technology to produce its own PE resins, which has resulted in the flooding of cheap resins into the market.
“CTO facilities in China are also expected to grow until 2019.
“With less demand from China, resin prices will be under pressure across the region,” he said.
Shale oil from the US is also being used for plastic resin production.
Khaw said there are now facilities in the US being constructed to produce PE resin from shale oil.
“We expect these facilities to begin production by 2017.
“SLP may one day be importing shale oil-based resin for its packaging materials,” he said.
According to the UK-based research and consulting firm, GlobalData, worldwide polyethylene demand is forecast to rise by about 3.7% a year from now to 2018.
This higher-than-historic increase will occur in the US and Europe, GlobalData says.
“The US will witness a 2.4% growth rate a year during the forecast period.
“Demand in Europe, primarily in Russia, will meanwhile climb at 2.8% a year from 2013 to 2018, almost three times the level of growth during the last decade.
“These demand rises in the US and Russia will somewhat offset lower demand in Asia.
“A lower increase of 4.8% in Asia is predicted over the 2013 to 2018 period, compared to its 6% rate during from 2003 to 2013, due primarily to the region’s slower economic growth,” the report added.
Based in Kulim Industrial Park, SLP occupies a 7.4ha site, employing 320 workers in a 36,700sq m facility.
The group produces on an average 30,000 tonnes of plastic packaging materials annually.
http://www.thestar.com.my
December 29, 2014
DESPITE tumbling polyethylene resin (PE) prices, the local food and beverage industry in the country is consuming less plastic packaging materials, as buyers are waiting for resin prices to drop even lower.
Kelvin Khaw, managing director of Penang-based SLP Resources Bhd, said the selling price of PE had dropped to about US$1,350 (RM4,718) to US$1,400 per tonne presently, from US$1,600 per tonne early this year.
“We will soon readjust the prices of our packaging materials to about RM6.70 per kg, down about 5% from RM7 per kg.
“But this does not mean that the lower pricing will attract domestic buyers as they will want to wait for prices to decline further.
“They are different from our foreign customers in Japan, Australia, and New Zealand, who will stock up their inventory when the price goes down,” Khaw said.
Orders from the domestic market declined by about 15% in the fourth quarter compared to the same period a year ago.
But because domestic sales for the first three quarters of this year have been stable, the domestic contribution to SLP’s revenue is expected to be around 53% this year, compared with 56% in the same period a year ago.
However, despite the drop in domestic demand, SLP is on target to achieve about RM176mil in sales this year, just 2% short off its RM180mil revenue target.
From January to November this year, the company recorded sales of RM162mil.
“We only have one more order of about RM14mil to deliver before the end of the year,” he said.
He said most of the company’s orders came from Japan, Australia and New Zealand.
“Customers overseas are buying more from Malaysia because our competitors in China are no longer able to produce cheap plastic packaging with consistent quality.
“Due to rising production costs, the prices of plastic packaging materials from China, for example, are almost the same as what we charge,” Khaw said.
Moving forward, SLP is planning to increase its production.
The company is spending RM6mil next year for another production line to raise its monthly production capacity by 6% from 2,600 tonnes presently.
The new production line will be used to produce more thin-gauge packaging materials under the company’s product brand Maxinflax. SLP also intends to develop innovative plastic-based consumer products.
“However, we expect the revenue to drop slightly next year as the price of PE resin is projected to dip further.
“The net margin will be maintained due to the production of more value-added thin-gauge packaging materials, which requires the use of less raw materials, saving us on material cost.
“Thin-gauge packaging materials presently comprise around 15% or 400 tonnes of our monthly production, but this will increase to 20% or 550 tonnes monthly,” he said.
On its future products, Khaw said the group had invested RM2.5mil to develop the world’s first anti-bacterial sleeve to be used as a cover for door handles.
“The purpose of the product is to minimise cross contamination to promote personal hygiene.
“We have completed the development of the product and are now waiting for the right time to commence mass production, as the global economy has yet to recover fully,” he said
Khaw said global PE resin prices would weaken further due to the weak demand from China.
“China is now using coal-to-olefin (CTO) technology to produce its own PE resins, which has resulted in the flooding of cheap resins into the market.
“CTO facilities in China are also expected to grow until 2019.
“With less demand from China, resin prices will be under pressure across the region,” he said.
Shale oil from the US is also being used for plastic resin production.
Khaw said there are now facilities in the US being constructed to produce PE resin from shale oil.
“We expect these facilities to begin production by 2017.
“SLP may one day be importing shale oil-based resin for its packaging materials,” he said.
According to the UK-based research and consulting firm, GlobalData, worldwide polyethylene demand is forecast to rise by about 3.7% a year from now to 2018.
This higher-than-historic increase will occur in the US and Europe, GlobalData says.
“The US will witness a 2.4% growth rate a year during the forecast period.
“Demand in Europe, primarily in Russia, will meanwhile climb at 2.8% a year from 2013 to 2018, almost three times the level of growth during the last decade.
“These demand rises in the US and Russia will somewhat offset lower demand in Asia.
“A lower increase of 4.8% in Asia is predicted over the 2013 to 2018 period, compared to its 6% rate during from 2003 to 2013, due primarily to the region’s slower economic growth,” the report added.
Based in Kulim Industrial Park, SLP occupies a 7.4ha site, employing 320 workers in a 36,700sq m facility.
The group produces on an average 30,000 tonnes of plastic packaging materials annually.
http://www.thestar.com.my
