It is now southeast Asia’s largest supplier of paint binders, following the British firm’s £10 million (RM49.4 million) purchase of Quality Polymer Sdn Bhd from Nippon Paint Malaysia. Quality Polymer is now placed under Yule Catto’s 70 per cent unit Revertex Malaysia Sdn Bhd. Yule Catto is also the owner of the Synthomer Group, of which Revertex is a key part.
Paint is essentially made up of pigments, binders and solvents. A pigment gives the paint its colour and is mixed into a solvent. The binder, which form the bulk of the paint, binds the pigment to the solvent to form a very thick liquid so that it can properly coat a surface.
In an interview with Business Times here, Synthomer Asia managing director Dr Brendan Catlow said: “The Quality Polymer purchase is just the beginning of our plans to expand across Asia.
“We aim to have more than 50 per cent of our sales from emerging markets by 2015. The only way to achieve this target is via major investments and acquisitions,” he said.
On the size of Synthomer’s war chest, Catlow declined to specify but said: “We have a very strong balance sheet.”
On details of the recently-concluded Quality Polymer purchase, Catlow said: “We’ve been in talks with Nippon Paint for over a year before we finally agreed on the price. This acquisition is all about growth, not cost reduction. There’s no voluntary separation scheme.” Quality Polymer, which employs 30 staff at its Pasir Gudang factory in Johor, chalks up an annual sales of some £10 million.
With the addition of Quality Polymer’s 15,000-tonne facility, Catlow said Synthomer’s paint binders capacity in Asia now totals over 65,000 tonnes a year. “Our binders are used in eight of top 10 global paint brands. In view of the increasing demand for paint binders in southeast Asia, we’re planning to set aside more investments to raise capacity at the Pasir Gudang facility. This will be carried out next year,” he said.
According to the World Paint & Coatings Industry Association, the 10 most popular paint brands are AkzoNobel, PPG Industries Inc, Sherwin-Williams Co, DuPont Coatings & Color Technologies Group, ICI Paints, BASF Coatings AG, RPM International Inc, SigmaKalon Group BV, SACAL, Valspar Corp, and Nippon Paint Co.
Synthomer is not a newcomer to Malaysia, having been in business here for 75 years.
Apart from making paint binders, it is also the world’s number one supplier of nitrile latex, catering to the needs of the top 10 rubber glovemakers in southeast Asia.
Describing Synthomer’s business, Catlow said: “Our polymers are used in a wide range of industries to create and enhance everyday consumer products. “Whether you’re reading a book, opening a pack of breakfast cereals, painting your kitchen, labelling an envelope, laying a carpet, tiling a bathroom, using hairspray or simply driving your car, you could be using a product that has been improved by our scientists,” he added.
KUALA LUMPUR: The Food Standards Amendment (Truth in Labelling — Palm Oil) Bill 2010, if passed by the Australian House of Representatives, would undermine the country’s palm oil exports to Australia — a central pillar of the Malaysian economy.
Malaysian Palm Oil Council (MPOC) chief executive officer Tan Sri Dr Yusof Basiron testified at the Australian House Standing Committee on Economics, highlighting the importance of the industry to the Malaysian economy and how the bill would have detrimental effect on various sectors if passed.
In August, Yusof said the bill directly targeted the Malaysian palm oil industry, which would affect almost 100 per cent of all palm oil products exported to Australia. Incidentally, these exports account for 9.3 per cent of Malaysia’s gross domestic product.
The bill had also previously been expanded to non-food palm oil products, which meant that it was no longer a “food labelling” bill. Yusof said the bill was discriminatory because it singled out palm oil and not other vegetable-based oils.
The discrimination would directly affect the livelihood of almost one million Malaysians who were involved in the growing, harvesting, packing and logistics of palm oil products.
Yusof argued that the singling of Malaysian palm oil products from other food products also violated several principles of the World Trade Organisation as well as terms of the Asean-Australia-New Zealand free trade agreement.
The bill would undo the efforts taken over many years to bring Australian and Malaysian trade relations and bilateral ties closer.
Yusof said the bill would also have adverse effects on Australian consumers as there were costs associated with the label changing exercise, estimated at between A$5,000 (RM15,000) and A$15,000 per product.
The products affected in the Australian market by the label change are numbered in the thousands.
Yusof said claims by environmental groups that the oil palm industry had a huge negative impact on the natural environment were without basis.
The bill was the work of environmental non-governmental organisations with the aim of gaining a monopoly on the palm oil supply chain by promoting their own certification scheme for “sustainable” palm oil.
Also, claims by Australian forest conservation groups that Malaysia had been practising rampant deforestation for oil palm plantations were hypocritical and unsubstantiated.
Ironically, the United Nations’ Food and Agricultural Organisation reported that Australia’s rate of deforestation was at a rate five times greater than Malaysia.
Concluding his presentation, Yusof said the labelling exercise which discouraged palm oil product consumption would undermine conservation efforts in Malaysia, such as the Malaysian Palm Oil Wildlife Conservation Fund, as it supported the enforcement of environmental laws, wildlife sanctuaries and reserves.
The full report can be accessed at www.theoilpalm.org, an online resource initiative by the MPOC.
MALAYSIA has welcomed the decision by the Australian government not to support a legislative proposal for the compulsory labelling of Malaysian palm oil.
Prime Minister Datuk Seri Najib Razak said yesterday this was a decision that “extremely pleases” Malaysia, in particular the palm oil industry.
“I have expressed my thanks to Prime Minister Julia Gillard for this,” he told Malaysian journalists after delivering his keynote address, “Building Infrastructure for the 21st Century” at the Commonwealth Business Forum at the Burswood Entertainment Complex.
Najib, who is here for the four-day Commonwealth Heads of Government Meeting, had earlier in the morning held bilateral talks with Gillard.
It was reported that Gillard’s government would oppose the bill, which was deemed to be in violation of the country’s obligation to the World Trade Organisation. The bill, however, has the support of the Liberal-National party coalition.
The prime minister said the Free Trade Agreement talks with Australia were ongoing and expected to be concluded next March. “This is a big plus for us. That is why it is important to have cooperative arrangement because it spills over into other sectors as well and is positive in terms of assisting them in terms of goodwill between two gover nments.” The bill requires new labels on food products containing palm oil to identify the ingredients and carry a certification attesting to environmentally sustainable practices.
Malaysia has presented a strong case against the bill called the Food Standards Amendment (Truth in Labelling – Palm Oil) Bill 2010, arguing that it is in violation of WTO provisions.
The Australian Senate passed the bill in June, but before the Lower House of the Australian Parliament’s debate, there will be a hearing at the committee level.
Malaysian Palm Oil Council chief executive officer Tan Sri Dr Yusof Basiron said such compulsory labelling of palm oil would affect the imports of food products and was a discriminatory use of the labelling law against the interests of palm oil.
Bilateral trade last year was valued at US$10.63 billion (RM32.31 billion), with exports valued at US$7.46 billion (RM22.67 billion), while imports from Australia were valued at US$3.17 billion (RM9.63 billion). Australia is Malaysia’s 11th largest trading partner. It is also Malaysia’s eighth largest export destination and 12th largest import source.
Najib, who was accompanied by his wife, Datin Seri Rosmah Mansor, would join 52 world leaders at the opening of the biennial meeting by Queen Elizabeth II at the Perth Convention and Exhibition Centre.
KUALA LUMPUR: IOI Corp Bhd, which stands to lose an RM83 million deposit to Dutaland Bhd from a deal turned sour, yesterday insisted that the latter had breached their sale and purchase agreement.
Dutaland, however, maintained that it had not acted in breach of the agreement relating to a piece of plantation land.
IOI previously announced that it had terminated the agreement to buy 11,977.91ha of oil palm plantation land in Sabah from Dutaland for RM830 million. IOI then said the cancellation was “due to non-compliance of certain terms and conditions”.
On July 28, 2011, IOI’s unit Sri Mayvin Plantation Sdn Bhd had signed the deal with Dutaland’s unit Pertama Land and Development Sdn Bhd. Yesterday in a filing to Bursa Malaysia, IOI maintained that Dutaland, among others, had failed to continue upkeeping and maintaining the properties. It also claimed that there were discrepancies in the particulars relating to the properties, and that Sri Mayvin had communicated the alleged breaches to Pertama Land.
Dutaland, in its latest filing to the stock exchange, said Pertama Land had consistently maintained that it was not in breach of the agreement as alleged. There had also “been non-compliance on the part of Pertama Land under the agreement as alleged or at all by Sri Mayvin”, it added.
Meanwhile, analysts said there will be a minimal impact on IOI’s overall earnings if it loses its RM83 million deposit from the deal inked with Dutaland Bhd a few months ago. This is because IOI is a cash-rich company with profits of close to RM2 billion to RM3 billion a year.
Losing the RM83 million deposit on that deal would not make a big difference as the potential loss will only lower its earnings by three to four per cent, said several analysts when contacted by the Business Times yesterday.
“It’s too early to say (if the deposit will not be returned) but if they can prove that it is non-compliance, then they should be able to get their money back. But if they lose their deposit, then there would be minimal impact on the company as it makes RM2 billion in profits in a year, so it won’t hurt much,” said one analyst.
It will not be the first time IOI will lose its deposit. In 2008, the company had forfeited its deposit of RM73.4 million after it walked away from buying Menara Citibank.
Analysts, however, said the Citibank and the Dutaland deals cannot be equated, given that the company had decided to walk away from the former deal.
Dutaland earlier said it was seeking legal advice and had notified OSK Trustees Bhd not to remit to Sri Mayvin the deposit of RM83 million being the 10 per cent deposit paid by Sri Mayvin under the agreement and any interest accrued.
Sludge ponds emit greenhouse gases like methane after palm oil is extracted from fresh fruit bunches at the mills. OOI TEE CHING tells how palm oil millers capture this gas and turn it into clean energy by investing in biogas plants. These anaerobic digesters behave like our intestines, containing friendly bacteria that feed on organic matter to produce flammable gas and solid waste.
PALM oil millers in Malaysia are leading the way in “greening” the palm oil supply chain by capturing greenhouse gas before it enters the atmosphere and turning it into green energy and organic fertiliser. Under the Palm Oil National Key Economic Area of the Economic Transformation Programme (ETP), the country is targeting 500 biogas plants by 2020. This initiative is expected to generate about RM2.9 billion in gross national income and create 2,000 jobs by 2020.
Malaysia’s growing green jobs sector is vital in our ability to create jobs and compete globally in the new economy. By leveraging on home-grown green technologies, millers trap methane from the sludge and channel it to gas engines to generate electricity.
The government encourages the oil palm industry to operate more sustainably. Since January 2010, the Ministry of Energy, Green Technology and Water has pledged to facilitate RM1.5 billion worth of cheap loans via local banks for the provision and use of green technologies.
With these incentives, the Malaysian Palm Oil Board’s engineering and processing research division director, Dr Lim Weng Soon, is confident that the country is on track to achieve the target. “There are currently 46 biogas plants in operation, 22 under construction and a further 46 in planning stage.”
In a recent media visit to United Plantations Bhd’s estate in Jendarata, Perak, vice-chairman/executive director (corporate affairs) Datuk Carl Bek-Nielsen said the benefits of this waste-to-energy project is extensive and varied.
Since the sludge is converted into biogas and fertiliser, there is no chance of it entering water bodies and polluting them.
While the organic fertiliser is ploughed back into the fields, greenhouse gas extracted from the biogas plants is fed into a combined steam and power plant at the mill to generate electricity for the surrounding community in this estate.
Bek-Nielsen said when biogas plants are being used to generate electricity for the estate’s own use, leftover biomass from the mills can now be sold as solid fuel to others in the manufacturing sector for as high as RM180 a tonne.
Indeed, such waste-to-energy projects are gaining momentum among palm oil millers because the projects are not only kind to the environment, but also easy on the wallet. “It’s also about economic motivation,” Bek-Nielsen said. “While everyone wants to do the right thing, there need to be an extra incentive on top of the motivation of putting up plants that emit less pollution.”
“Currently, we have three biogas plants in the country and they help a lot in terms of cost-savings. Although we’ve invested RM20 million to set up three biogas plants, the impact that we receive is really worth it. We’ve been able to reduce our annual fossil fuel usage by 25 per cent,” he added.
If both leaders were to agree to this proposal during their bilateral meeting in Lombok, Bali today, oil palm planters in Malaysia and Indonesia, particularly some six million smallholders, will benefit from higher palm oil prices.
Current high CPO taxes in Malaysia and Indonesia have caused refiners to slash prices in order to compete, and this, in turn, has lowered the CPO prices.
Since February, the global benchmark pricing for palm oil on Bursa Malaysia’s Derivatives Market has dropped by more than 25 per cent. Yesterday, the third month palm oil futures closed at RM2,892 per tonne.
“The leaders will deliberate on the proposal to lift the high CPO taxes on both sides. It is on the agenda,” a reliable source told Business Times. Oil palm planters in Malaysia and Indonesia supply more than 85 per cent of the world’s palm oil. “There are about 1.5 million smallholders in Malaysia and triple that in Indonesia. If the CPO taxes are lifted, higher prices will make many planters happy,” the source said.
The scheduled talks between the two leaders is a follow-up to the 11th Joint Commission for Bilateral Cooperation meeting between Malaysia and Indonesia in Kuala Lumpur last week.
Malaysia is the world’s second largest palm oil producer, harvesting about 17 million tonnes of CPO a year. This, however, is not enough to feed some 20 refineries here. As a result, they need to import a large amount of CPO from Indonesia. But with the high CPO taxes, supply from Indonesia has become limited and expensive for Malaysian refineries.
Palm Oil Refiners Association of Malaysia chief executive officer Mohammad Jaaffar Ahmad reportedly said high CPO taxes had been detrimental to Malaysian refiners but benefitting refiners in Indonesia, with a price advantage of between US$72 and US$129 (RM223.6 and RM400) per tonne for processed palm oil exports.
He also highlighted that since 2008, Malaysia’s annual refining capacity has dropped by almost 300,000 tonnes.
When contacted, the Indonesian Palm Oil Producers Association or Gabungan Pengusaha Kelapa Sawit Indonesia (Gapki) said it is re-iterating its call to the Indonesian government to revise the CPO export tax.
“The progressive tax is hurting producers and reducing competitiveness. Smallholders have no incentive to invest in the replanting and maintenance of their oil palm estates. We want the government to re-evaluate the ruling,” said Gapki executive director Fadhil Hasan.
“We have been paying very high taxes whenever there was an increase in international palm oil prices,” he told Business Times.
Currently, the Indonesian CPO export tax is set at 22.5 per cent while the maximum export tax on refined, bleached and deodorised palm oil is capped at 13 per cent.
Despite the Indonesian government justifying the high CPO export tax as to encourage the development of palm oil processing industry in the country, the reality is far from that. Fadhil noted that the significant tax gap between CPO and its derivative products seemed to be incentivising rampant smuggling of CPO.
Nevertheless, consumers in Peninsular Malaysia and Sabah, whose monthly electricity bills exceed RM77, will have to start paying an additional 1 per cent levy to subsidise RE producers from December 2011.
The FiT essentially guarantees RE producers a premium selling price over that generated from depleting and finite sources such as oil, gas and coal.
Power generated from sustainable sources that will benefit from FiT includes that of oil palm biomass, biogas, small hydro and solar.
Energy, Green Technology and Water minister Datuk Seri Peter Chin said, “RE producers need to go online and bid for the RE quota and the relevant FiT rate. “This is because the FiT rate differs for different RE technologies and installed capacities.”
Chin said this is the first time a government agency is facilitating FiT bidding via the Internet. “This is to ensure a transparent application process. The online FiT application system is available from December 2011,” he told reporters after witnessing the signing of memorandum of understanding between Flexo-research Malaysia and Flexoresearch Thailand here yesterday.
RE producers have to apply for licence from Sustainable Energy Development Authority (Seda) via http://seda.gov.my/.
Chin said during the application for a FiT approval, an eligible producer will be required to submit the work plan for their RE installation/plant. Once the Feed-in-Approval is granted, Seda will closely monitor each RE installation/plant until commencement date is achieved.
This close monitoring is to prevent the applicant from monopolising the RE quota. This monitoring is important as once a FiT application has been approved, a portion of the RE fund will automatically be allocated to the approved applicant.
The minister said the RE quota is revised accordingly to take into account the reduced RE Fund availability.
To avoid any monopolisation of the RE quota, Chin said Seda’s online system will track the RE installation/plant’s milestones via the submitted work plan. If any delays are detected, a notice will be sent to the applicant to request for an explanation for the delay. If the applicant fails to respond satisfactorily, then the application will be revoked.
When that happens, the fund committed to the applicant will be released, and this will return the allocated quota to the system. “This is to prevent any abuse of the FiT system and to allow other interested parties to apply for the FiT,” Chin added.