KUALA LUMPUR: Petronas Chemicals Group Bhd (PetChem) is looking to invest RM3bil in capital expenditure (capex) this year, and hopes to reach a final investment decision (FID) on the expansion of its plant in Gebeng, Kuantan by year-end.
“We are hoping to get the FID by year-end and the plant should be operational by 2016,” chairman Datuk Wan Zulkiflee Wan Ariffin said after its AGM yesterday.
He said PetChem and BASF would invest US$500mil (RM1.5bil) to expand their operations at Gebeng to manufacture products for the global flavour and fragrance industry. The investment would be in an integrated aroma ingredients project at their existing joint-venture site.
On its massive capex this year, chief financial officer Wan Shamilah Saidi said the bulk of the amount would be used for the expansion of its Sabah Ammonia Urea (Samur) project. She said the group's strong balance sheet would be able to support its capex. As at Dec 31, 2012, PetChem had cash and cash equivalents of RM9.3bil.
Wan Zulkiflee said the Samur project would boost its urea production by 1.2 million tonnes per annum, bringing the total urea production to about 2.6 million tonnes a year.
“We target to complete the Samur project by August 2015. The plant should begin commercial operations two months after some commissioning and testing process is completed. The completion rate is about more than 30%. We're on track (for completion),” Wan Zulkiflee said.
He said the added capacity would provide a boost to PetChem's earnings for the fertiliser and methanol business segment, which currently contributes about 25% to the entity's revenue and profit.
However, Wan Zulkiflee noted that the growth would depend on global urea prices. The current price is US$380 (RM1,148) per tonne.
President and chief executive Dr Abd Hapiz Abdullah, meanwhile, said PetChem would continue to explore the production of higher value products and optimise its offerings.
“We cannot stay put. Innovation is the key. We need to come up with innovative products to propel PetChem higher as well as to maintain our position,” he said.
Abd Hapiz disclosed that PetChem would probably take a hit in the third quarter when it shuts down one of its cracker plants in Kertih, Terengganu, for maintenance. The maintenance would take between 30 and 50 days.
To another question, Wan Shamilah said PetChem still had about RM3bil from its initial public offering exercise in 2010, adding that the company had five years to utilise the fund.
Wan Zulkiflee said it would use the funds to pursue some opportunities, without disclosing any details. “We certainly have plans. We could also use it for the Samur project.”
On another note, Wan Zulkiflee said the company had made the decision to discontinue its vinyl business and had taken a one-off provision amounting to RM490mil in fourth-quarter 2012.
In January 2013, PetChem ceased operations of its vinyl chloride monomer and polyvinyl chloride plants in Kertih.
He said it was currently undertaking a divestment process of its vinyl business in Vietnam.