BANGKOK, Jan 15, 2019 - (ACN Newswire) - Chememan PCL (SET:CMAN) Chief Executive Officer, Mr. Adisak Lowjun discusses the company's strategy and outlook in The Executive Talk (TET) by ShareInvestor.com.
TET: Please explain the history of CMAN.
We founded the company 15 years ago. My personal background was that I was a president of a major Steel Mill and all the steel mills throughout the world have to use lime, and if you understand the steel complex then you'll know that there is a great requirement for lime as a basic chemical. After further research we also learnt that lime is an important raw material for other industries such as pulp and paper, power plants and it was an exciting time. So, we went into an auction process for our first factory which was part of the '97 financial crisis and we were able to acquire it with a low cost of investment. As with anything, the reality was worse than what we put on paper and it took several years to learn about the business, the industry, the technology. Year by year, we became much stronger as a firm.
TET: What has been driving CMAN's growth over the past decade?
First, we modernised the kiln as it was from the 90's and we are fortunate to have, in my honest opinion, the best quarry in Asia. I have been looking for another one and still cannot find one with matching quality as what CMAN's has. This truly is a key success factor for the firm.
During the energy crisis when oil prices rose to over USD 100 per barrel, energy being a key cost for us and during such an extreme volatile period, we could not pass it onto customers because of our commitments, then we discovered the possibility to switch from fuel oil to gas firing which allowed for us to reduce costs while maintaining our high quality.
Following on from this, we further improved our technology by using a coal firing gasification process which was developed between us, coal suppliers, equipment suppliers to combine these elements together for KK1 in 2011. It was a breakthrough innovation for us and we used the same technology for KK2, KK3, KK4, KK5, and KK6, hence this innovation has driven our growth in the past decade. CMAN used this knowledge to be able to acquire customers throughout the region.
We set up overseas operations in Australia. In India we are currently constructing two factories, and we are looking at setting up additional operations in Vietnam as well. So we have climbed the curve from being a local company to a regional one and now we are focusing upon how to combine the productions of the countries together, a true global network, providing to global customers as ensuring the security of supply is a critical success factor for our lime business.
TET: Who are CMAN's customers?
Generally, 50% is from domestic sales and the rest is from exports. In Thailand, 25% goes to sugar companies which has been our long-term customers, 20% to chemicals companies, 20% to environmental use, another 20% to pulp and paper, 10% to construction companies and the remaining is fragmented. For exports, close to 70% goes to gold mines, 20% to pulp and paper, 10% to nickel mines and the rest is also fragmented. What is interesting is that steel mills are typically the largest consumer of lime; however, Thai steel industry is not strong at the moment, but the second largest customer is gold and copper mines so we supply to them in Australia, Papua New Guinea, and Lao PDR.
In the near future, we see a rising trend of renewable energy, specifically wind farms, as a potential market. Wind turbines are made from specialty fibreglass which requires lime and we have been supplying to the world's leading fibreglass producer. Power plants, especially coal fired power plants are large customers because lime has been used for flue gas treatment which it helps to absorb and neutralize sulfur oxides from stack gases and reduce emissions from hazardous air pollutants to the atmosphere. Autoclaved aerated concrete productions also require lime and so they are too our customers.
Also, in the future of Thailand, we see a great opportunity in bio-plastics industry where bio-hub expansion will soon emerge in Nakorn Sawan, Khon Kaen, as well as Rayong. Given the tremendous benefits of lime, we have been able to diversify our portfolio of customers through various industries and across many geographic areas.
TET: What differentiates CMAN from its competitors and why is lime fundamental to industries?
The nature of the lime business is that it is hard to scale, and a lot is dependent upon the quarry that a firm has. The largest productions in the world have 10-12 million tonnes per annum and the rank moves down quickly to 1 million tonnes, then there are several players with less than 100,000 tonnes per year, hence why we consider ourselves fortunate to have an amazing quarry that provides us a high competitive edge.
Now we call our firm Chememan because it is a combination of Chemical and Human as we all consume this chemical. Sugar, rice, paper, animal feed and several others all require high quality of this human-friendly calcium and alkaline based chemicals within some level of the production process. And so our products are essential for day-to-day life. Thus, CMAN on paper may look like a pure commodity business but when ones take a deep dive, they will realise that it is a very interestingly niche business model.
TET: Why did CMAN decide to IPO?
Financial risk is something that we take into consideration. Before going public, we were satisfied with the company, the processes and the expansion plans, but as we saw opportunities emerge, we needed capital to capture those opportunities, and this was one of the key raising for going public to de-risk our balance sheet and to have the funds necessary to expand to a larger scale which is what CMAN is currently doing.
TET: What types of risks impacts CMAN and its industry?
Risks evolve over time. At the beginning its fears of a lack of capital to keep the business afloat, then after this the risk becomes how to scale, then it becomes commodity price volatility which impacts our margins and revenue, and then the next risk becomes financing to expand the business. Yet despite all of these risks and challenges we were able to manage risks appropriately. Going forward, we see human capital as a risk and are now developing a school of us to recruit and train young engineers, businessmen, to groom them to grow the business over the next 10 to 20 years. Another potential risk that investors may consider is the concession contract, however we have focused on CSR, Community Management, and now the Ministry is using our quarry as a best-case reference for other quarries in Thailand.
TET: Where do you expect to see CMAN in five years from now?
Given our strengths, we will continue to expand our capacity to serve customers across different industries and geographies throughout Asia, Australia, and Africa. Our strengths are the quarry and our financial capabilities in the coming years. We will be expanding from 1 million tonnes to 2 million. Should we reach 5 million in the future, then CMAN would become the World's 4th largest. There is demand for our products in the region and if the Thai government can achieve the EEC, the S-Curve industries, the bio-chemicals and several other industries would lead to a further rapid demand growth in Thailand for lime.
Finally, what is important to us is to also not just chase financial targets but to ensure that CMAN's team works well together internally and serve its customers and the community well.
About The Executive Q&A Series
The Executive Q&A Series is presented by ShareInvestor, Asia's leading financial internet media and technology company and the largest investor relations network in the region. The interview was conducted by Pon Van Compernolle. For more information, Email [email protected] Website: www.ShareInvestorThailand.com