CAROTECH
Bhd, a homegrown biotechnology company that has achieved some measure of success
and recognition as a pioneer in the field, plans to invest over RM100mil in research
and development (R&D) to produce more commercially viable biodiesel products.
Carotech, a 51%-owned subsidiary of Hovid Bhd, specialises in the extraction
of tocotrienol (found in most vitamin E), carotene complex (vitamin A) and phytosterols
(sterols) from crude palm oil (CPO) used in dietary supplements for pharmaceutical
products, beverage, food and cosmetics.
Carotech managing director
David Ho Sue San said the company was in talks with several bankers on how much
funds the company could raise. “Our immediate focus is to expand production
capacity and increase R&D for future biodiesel products,” he told StarBiz
in an interview.
Currently, the company has a plant in Chemor,
Perak, which was upgraded last year to process 40 tonnes of CPO per day, compared
with 17 tonnes previously.
“We
want to expand our production capacity significantly - maybe as much as eightfold
- to meet the current demand, and will either expand our existing plant in Ipoh
or build a second CPO processing plant to boost production levels of tocotrienols,”
he said.
Ho also plans to set up R&D facilities in China and
India in the near future. “The objective of our foray into India and China
is to set up drug manufacturing facilities, either on our own or via joint ventures,
possibly even with the government,” he said, adding that Carotech was looking
at major cities like Mumbai, Hyderabad, New Delhi and Bangalore in India.
According to Ho, Carotech now commands about 75% of the global tocotrienol
market worth between US$13mil and US$15mil annually.
“There is
still a lot of growth potential for tocotrienol, given that the market for traditional
vitamin E in the United States was worth about US$400mil last year,” he said.
Ho, who is also Hovid managing director, said Carotech had recorded
double-digit growth for the past several years, and both Carotech and Hovid were
expected to maintain their performance, going forward.
Carotech
now exports to 30 countries and derives 95% of its sales from the US, Europe,
Japan and Australia, with US leading the demand for tocotrienols worth about US$10mil
annually.
Ho said the company aimed to further expand its market
presence in Europe and Japan to reduce dependency on the US market.
“Our
New Jersey-based unit Carotech Inc manages most of the group’s sales and
marketing activities worldwide,” he said, adding that the company’s
products could be grouped into two divisions - phytonutrients and oleochemical/bio-diesel.
Carotech’s
phytonutrients division produces tocotrienols, carotene and phytosterol, while
its oleochemical division generates methyl ester (commonly known as biodiesel)
and crude glycerine.
An analyst with TA Securities Holdings
Bhd said the three main growth factors which could spur Carotech’s earnings
would be the supply-demand gap for methyl ester, improvement in efficiency, and
rising demand for methyl ester and tocotrienol.
“We believe
demand for both products would continue to outpace supply,” he said, adding
that company was in a favourable position, being possibly the largest and most
profitable biodiesel producer in Malaysia.
The analyst said that
while most other players barely broke even or incurred losses, 53.3% of Carotech’s
net profit for the financial year ended June 30, 2005 was derived from the sale
of methyl ester.
“The distinguishing factor is Carotech’s
patented production process. Bio-diesel producers typically produce unprocessed
methyl ester, which is later sold as bio-diesel or bleached, and then sold to
the oleochemical industry.
“Carotech, on the other hand,
has taken the process a step further, via a patented process called molecular
distillation, to extract high-value phytonutrients from the unprocessed methyl
ester, enabling it to make higher revenue per kg of CPO processed compared with
ordinary bio-diesel producers,” he noted.
In addition, the
analyst said the European Union (EU), which was currently the largest consumer
of biodiesel, had set ambitious targets of 2%, 5.75% and 20% for biodiesel conversion
for transport purposes on energy content basis, by 2005, 2010, and 2020 respectively.
“To meet the projected demand, the EU is planning to aggressively
increase the supply of rapeseed (the most widely used vegetable oil to produce
biodiesel). But even then, we believe demand is likely to outpace supply,”
he said.
He
added that given the supply constraint, EU would continue to depend significantly
on imports to meet rising demand.
The analyst said the high oil
price was likely to stay and demand for alternative sources of energy would increase;
hence biodiesel demand should increase further over time.
For
financial year 2005, Carotech posted a pre-tax profit of RM7.9mil on the back
of RM53.3mil revenue.
The company has over 300 health products
and churns out about 20 new products a year. It also invests about 3% of its revenue
on R&D annually.
