UK-headquartered synthetic dispersions and latices manufacturer Synthomer Asia, which is part of the UK-listed Yule Catto, is increasingly looking to China and the rest of Asia to expand its business across the region, says Dr Brendan Catlow, Asia Managing Director, in this interview with Lyn Cacha.
Boosting output in Malaysia
Lured by investment incentives and a rosy outlook, Synthomer has expanded its business across the region by investing in its first carboxylated styrene-butadiene rubber (XSBR) facility in Asia. The 70,000-tonne/year plant, located at the company’s Pasir Gudang facility in Malaysia, will be operational by the first quarter of 2013.
Synthomer’s XSBR is used by the paper and board coating and construction sectors. “The Asian coated paper industry is growing rapidly, particularly in China, Indonesia and India, and our choice of Pasir Gudang for this investment reflects its ideal location for raw material supply and outbound logistics,” said Catlow.
Dr. Brendan Catlow says with the recent investments, the firm is developing Malaysia as a platform to serve customers in the entire region.
The investment above follows a major expansion of the 100,000 tonne/year-acrylonitrile butadiene latex (XNBR) facility, also in Pasir Gudang, to support increasing customer demand from the fast expanding synthetic latex glove market. Catlow added that when completed, the facility will be the world’s largest for nitrile latex.
At present, a bulk of the company’s production of nitrile latex comes from Asia. It has a 40% share of the global market, which is estimated to be 550,000 tonnes. “We are the world’s largest supplier of nitrile latex,” affirmed Catlow, adding that most of the output is used to make nitrile gloves for the medical and healthcare sectors. The world market for nitrile latex is seen to be growing at 15% a year.
The firm has eight plants in Malaysia on four different sites. Its site in Kluang, Johor, alone houses five independent plants.
“We have expanded every year since 2007. From 45,000 tonnes, the Synthomer plant in Kluang has expanded to 120,000 tonnes of nitrile latex. With the acquisition of PolymerLatex, we have added another 100,000 tonnes and today we have a capacity of 220,000 tonnes of nitrile latex,” said Catlow. By 2013, the combined capacity of the Pasir Gudang and Kluang plants will be 300,000 tonnes/year.
Synthomer also makes high solid styrene-butadiene-copolymer (HS-SBR), for producing textile floor coverings and latex foam mattresses, as well as acrylic and vinyl dispersions that are used in surface coatings.
Growth to follow
The company has invested over EUR50 million in the capacity expansions in both the Malaysian XNBR and XSBR latice facilities this year alone, attesting to its commitment to the region.
The investments are also in line with the firm’s goal of achieving more sales from emerging markets and towards its vision of being the third largest emulsion polymer company globally.
“By 2015, we aim to establish a number one or two position in our chosen markets and geographies, with half our sales being generated from emerging markets such as China, Indonesia and India,” added Catlow.
Over the next three years, the company has forecast a 5% YoY EBIT growth. It had a turnover of EUR1.45 billion last year, with Europe accounting for 55%, followed by the Middle East and Africa (10%), Americas (4%) and Eastern Europe (4%). Its sales in Asia alone reached EUR400 million or 27% of the total pie.
In terms of products, the company’s SBR accounted for 31%, followed by dispersions with 23%, specialities with 22%, NBR with 19% and compounds with 5%.
“After the acquisition of PolymerLatex in 2010, we doubled our capacity making us an important global player in our markets. We’re now among the top five suppliers of synthetic polymers and this was achieved by having organised the firm into six business units,” explained Catlow. (Parent company Yule Catto paid EUR443 million to acquire its German competitor PolymerLatex to expand its rubber chemicals empire.)
Synthomer’s business units comprise construction and coatings (23%); health and protection (22%), followed by carpet, compounds and foam (19%), paper (15%), functional polymers (14%) and performance polymers.
Businesses in the right locations
For the past five years, Synthomer has had a sales office in Guangzhou, China. Taking a big step forward, it established a trade office in Shanghai in January this year. Staffed with about 17 professionals, the office provides technical support to clients in the region. Catlow said that staff population will double over the next 12 months.
The additional resources will also cater to the growing coated paper industry in China, where paper and paperboard production is the second largest in the world. With over thousands of paper makers, the sector produced about 86 million tonnes while over 80 million tonnes were consumed in 2010, according to industry figures. The annual growth rate is expected to reach more than 10%. Catlow cites the rising middle class and urbanisation as driving factors for increased paper consumption in China.
Meanwhile, Catlow describes India as “a market of considerable interest” although the firm has no plans to set up a facility just yet.
“We’re setting up businesses in the right locations to enable us to practice cost-effective production and to collaborate closely with our customers and suppliers,” he added. Catlow, who has 25 years experience in the chemical industry, reinforced the message that commercial success can only happen through detailed understanding of customer needs and perceptions.
Innovations to boost sales
In terms of R&D directions, the company has long-term technological and logistics partnerships with local organisations and universities. In Malaysia, Synthomer works with University Technology Malaysia (UTM) though Catlow did not go into the details.
When asked how much is allocated towards R&D, Catlow said, “How much we spend on R&D is almost irrelevant. The true measure we use is the percentage of total sales from new products introduced and last year it was more than 60% for XNBR.”
He adds, “For the health and protection market, we’re looking to improve our offer of nitrile latex. Generally, we’re improving the performance of our existing products and also testing and differentiating as well as introducing new features according to market needs.”
In conclusion, Catlow highlighted the need for flexibility in achieving innovations, stating that many successful ideas came from collaborations.