KUALA LUMPUR (April 26): Petronas Chemicals Group Bhd (PetChem) has allocated about RM4 billion in capital expenditure (capex) for its financial year ending Dec 31, 2017, with the bulk of the expenditure earmarked for its projects at the Pengerang Integrated Complex in Johor.
 
“Our capex in 2016 was about RM4 billion and we’re spending about the same amount for this year. The bulk of the capex will be for our investment in the PIC projects,” said PetChem chairman Md Arif Mahmood at a press conference today.
 
The group said the allocation for the year will be funded internally, as it still has RM7.4 billion in cash as at Dec 31.
 
PetChem managing director and chief executive officer Datuk Sazali Hamzah said this also includes investment for the recently-approved isononanol plant (INA) located within the PIC.
 
He said the plant’s total cost of US$442 million (RM1.92 billion) will be spread over three years, with the group allocating “a small amount” for this year.
 
“We won’t be spending a big amount for the INA plant this year, maybe about 10% of the total cost. It will be a small amount,” he said.
 
He explained there is great potential in the production of the material, due to its low-toxicity nature, as some of PetChem’s peers’ products have been banned in certain markets due to high toxicity levels.
 
“We see high potential in Southeast Asia (SEA) as well as in Asia Pacific, due to the population growth in these regions. The material is used in the manufacturing of toys, cables and the automotive segment and we predict the demand will continue to grow,” he said, adding PetChem is also in negotiations with potential clients for the product.
 
Sazali said the material — which is a specialty chemical — also commands better margins, approximately double the margins of basic chemicals.
 
He noted PetChem’s main competitor for the product is a plant based in China with production capacity of 180,000 tonnes per annum, which would not be sufficient to support demand in the region.
 
Meanwhile, PetChem’s plant will have a production capacity of 250,000 tonnes per annum, making it the largest INA plant in the region.
 
At 3.30pm, PetChem’s share price was down 14 sen or 1.86% at RM7.40, giving it a market capitalisation of RM59.2 billion.