Monday March 28, 2005 - PLANTATION-BASED Kulim (M) Bhd is on track tobecome the world’s largest fatty acid producer in a single location bySeptember this year.

Kulim managing director Ahamad Mohamad said the company’s fatty acidcomplex in the Pasir Gudang industrial estate was now undergoing expansionworks.

He said upon completion, the production capacity at its subsidiary,Natural Oleochemicals Sdn Bhd, (NatOleo) would be increased to 380,000tonnes per annum.

NatOleo, which currently produces 150,000 tonnes of fatty acids, is thesecond largest producer in the country. The country's largest producer hasa capacity of 330,000 tonnes per annum.

"The company is projecting RM1bil turnover from the oleochemicals businessby 2008 from RM517.2mil last year," Ahamad told StarBiz in Johor Baru.

Ahamad said revenue from the company’s oleochemical-related by-productsbusiness had been showing a positive trend in recent years.

Kulim recorded revenue of RM264.3mil from its oleochemicals business in2000, but the figure dipped to RM238.4mil in 2001.

However, revenue from the oleochemicals business rose to RM295.5mil in2002 and RM332.4mil in 2003.

Kulim purchased 91.4% of NatOleo in June 1994 from the National Financeand Land Co-operative Society (NFLCS) for RM54.4mil.

Ahamad said since taking over NatOleo from NFLCS, Kulim had so farinvested about RM150mil in the oleochemicals operations, including thethird plant, which would be ready this year.

"The new fatty acid facility will be integrated into the existing complexto form a fatty acid super complex," he said.

Kulim’s oleochemicals division consists of NatOleo, Dubois-Natural EstersSdn Bhd and Natural Soaps Sdn Bhd - all operating at the fatty acidcomplex in Pasir Gudang.

All three produce palm oleochemicals by-products - namely refinedglycerine, fatty acids, soap noodles, isopropyl palmitate, isopropylmyristate and medium chain triglycerides.

Ahamad said the by-products were widely used by manufacturers involved infood and beverage, beauty and healthcare products worldwide.

He said many Malaysians were not aware that many international beautyhouses in Europe, Japan and the US used the company’s by-products in theirfinished goods.

Ahamad said the company had gained international recognition forconsistently producing quality fatty acids and derivatives.

"The company has enjoyed progressive growth in market share worldwide andneeds to substantially expand capacity to cope with the huge demand," hesaid.

Ahamad said Kulim had decided not to get into the refinery business in thePasir Gudang industrial area as there were too many millers which resultedin excess capacity.

He said the company preferred to go for niche markets such as producingby-products from palm oil that had worldwide demand.

"Plans are also being finalised to produce fatty alcohols and soap bars(finished soaps)," Ahamad said.

He said an EGM would be held in June to propose several options to raisefunds for the new investment.

On finished soap bars, Ahamad said the proposed venture was largelyattributed to the availability of ready markets and expected increase infuture demand.

"We have options of either making the soap bars on our own or having ajoint venture with existing soap makers in Pasir Gudang," he said.

Kulim currently produces 45,000 tonnes of soap noodles per annum andexports them to China and Europe. The demand is expected to double thisyear due to strong demand.

Ahamad said market prospects for bath soap in Asia were good with a targetpopulation of three billion.

He said China would become the next important market in the region. TheChina Association of Surfactant and Detergent Industries had estimatedthat per capita consumption in the republic would increase to 3.7kg in2005 from 1.9kg in 1996.

Soap noodles resemble edible yellow noodles blended with colour andperfume, and extruded to make beauty and shower soaps in different coloursand shapes.

Presently, there are nine soap noodle makers in Malaysia and most of themare located in the Pasir Gudang industrial area.

Ahamad said Kulim was also looking at making vegetable-based detergent asmore consumers worldwide were switching to the eco-friendly product fromthe petroleum-based detergent. “We are not doing it immediately as makingdetergent is much more complex and requires huge investments.