Friday September 26, 2008
Changhuat to gain from O&G ops
By ZAZALI MUSA
It wants to reduce dependency on its core businessIt wants to reduce dependency on its core business
SENAI: Changhuat Corp Bhd expects its diversification into the oil and gas (O&G) related activities to help reduce the company’s dependency on its core business of making plastic injection parts and components.
Group managing director Lim Lai Huat said the profit margin in the manufacturing business had been eroding since 2002 due to the softening demand globally and increasing competition in the market, especially from plastic injector moulders in China and Vietnam.
“Prospects are good in the O&G industry, especially with the increased spending in offshore exploration and production (E&P) activities,’’ Lim told StarBiz recently.
He said the E&P activities were on the rise as many major petroleum corporations were searching for new energy resources in existing and new marginal, shallow and deepwater fields.
Changhuat shareholders recently approved the proposed acquisition by wholly-owned subsidiary Changhuat Manufacturing Sdn Bhd to acquire 63%, or 12.60 million shares, in Arus Dermaga Sdn Bhd for RM45mil.
The acquisition will be financed via RM4.5mil internally-generated funding and RM40.5mil bank borrowings.
Arus Dermaga, set up in May 2006, provides storage facilities for oil and gas products and other related activities. It was one of the six companies that got approval from the Marine Department under the Transport Ministry for ship-to-ship transportation of oil within the Johor Port and Tanjung Pelepas Port areas.
Changhuat general manager Dr Jeffrey Chua said the company decided to go into O&G as it offered quick returns, unlike other sectors like plantation.
Arus Dermaga has a five-year contract, expiring 2012, to provide an offshore facility for the storage of fuel oils or fuel oil blend stocks of 240,000 tonnes per month at US$3.75 per tonne to commodity trader Glencore.
“The on-going Asia Petroleum Hub project in Tanjung Pelepas and Johor’s close proximity with Singapore augurs well for the O&G business prospects,’’ Chua said, adding that Singapore, which has world-class oil refineries, would provide business opportunities for companies like Arus Dermaga.