Oleochemicals withstand downturn - Oxiteno

Made in Brazil

24 April 2009 00:00  [Source: ICB]

Oxiteno has become Latin America's first oleochemical producer. CEO Joao Benjamin Parolin answers questions about the company's new growth strategy

Q: Why did Oxiteno decide to move into oleochemicals?

Oxiteno was already the main customer of fatty alcohols in Latin America. We knew there was enough room for only one producer in the region and we decided to take that position. We also took into consideration the fact that the oleochemicals and derivatives we are producing are biodegradable and come from renewable raw materials. So their use has grown in most of the customer's formulations.

We started up our oleochemical facility at our site in Camacari, in Brazil's northeastern state of Bahia, during the fourth quarter of 2008. It's a new business and a new production technology for us.

Q: What does the new complex produce?

The worldscale plant will produce 80,000 tonnes/year of fatty alcohols, and we also produce C8-C10 fatty acid and some glycerin as coproducts.

Q: How do you expect Oxiteno's oleochemicals business to perform this year?

We expect 2009 to be a very challenging year but we have a very good position in Latin America. Our oleochemical facility is fully integrated into a very diversified surfactants and ethylene oxide (EO) derivatives business. We already do business with most of the oleochemical customers and we will enrich our product portfolio sold to these companies.

Demand for oleochemicals is concentrated in home care, personal care and pharmaceuticals markets. These markets don't depend on financing, so they won't be affected by the crisis as deeply as some other markets such as automotive or construction. After some inventory adjustments, demand will pick up again, because these products are essentials for people's daily lives.

Our main export market is Latin America, but we do business in more than 40 countries.

Q: How do you expect to grow the business?

We see the oleochemicals business as fully integrated with our EO derivatives business. At our Camacari site, we now produce EO, fatty alcohols, ethoxylates, ethanolamines and glycol ethers. A significant percentage of the fatty alcohols produced in Camacari will be ethoxylated at the site. Then the ethoxylates will be sulfated in our own plants in Tremembe and Suzano, both in São Paulo state. Sao Paulo is a good location for the sulfation because it is close to the main customers in Brazil. We already sell a diversified set of products to the key customers and the oleochemical ones will further enrich our portfolio.

Q: Oxiteno has announced a Reais 175m ($80m) investment plan for 2009. How will this be spent?

We will finish the first phase of the expansion of our sulfation capacity in Suzano, as part of our oleochemical business strategy. The expansion will help convert most of the C12-C14 ethoxylated fatty alcohols from Camacari into ether sulfates.

We will continue work on our EO expansion project in Camacari, which will start up by the end of 2010. We are also building a new acetates plant in Maua as part of plans to enrich our solvents portfolio. And finally, we are working on some energy-saving projects.

Q: How is Oxiteno responding to the global economic downturn?

First of all, by taking care of the cash generation. We are a conservative company from a financial standpoint, and we have grown very quickly during the last five years. Now is time to consolidate our growth. It will require a strong focus on sales, operations, marketing and R&D.

Q: What impact has the restructuring of the Brazilian petrochemical sector, to create two large players, had on Oxiteno's business?

The impact is positive because both Braskem and Quattor are key suppliers of Oxiteno. With their new configuration, and links with [state-owned energy group] Petrobras, these two companies have become stronger and more competitive and so has the whole supply chain.

WHAT ARE OLEOCHEMICALS?

They are chemicals derived from biological oils or fats.

BIOGRAPHY

Joao Benjamin Parolin joined Oxiteno in 1986 and was appointed CEO in January 2007. Previously he worked in the commercial area at Dow Quimica, the Brazilian subsidiary of Dow Chemical. He has a chemical engineering degree and an MBA from the University of Sao Paulo (USP), as well as a postgraduate degree in marketing administration from Fundacao Getulio Vargas.

OXITENO BACKGROUND

Oxiteno is the chemical subsidiary of Brazilian industrial company Ultrapar, which also comprises liquefied petroleum gas (LPG) storage and distribution company Ultragaz, fuel and lubricant distributor Ipiranga and special products logistics company Ultracargo.

Oxiteno produces a range of organic intermediates, solvents, surfactants and chemical specialties, and last year started up its oleochemical plant in Camacari. As part of its oleochemical business strategy, the company is expanding its ethylene oxide (EO) production capacity in Camacari and its sulfation capacity in Suzano.

Last year, Oxiteno reported a 33% rise in earnings before interest, tax, depreciation and amortization (EBITDA) to reais 210m ($96m), helped by recovery in selling prices and the depreciation of the Brazilian real in the fourth quarter. Net sales grew by 9% to reais 1.93bn despite a 14% drop in sales volumes.

Oxiteno is expected to participate in a major new refinery and petrochemical complex under construction in Itaborai, Rio de Janeiro state. Parent group Ultrapar is a key partner in the $8.4bn Rio de Janeiro Petrochemical Complex (Comperj), which is being implemented by state-owned energy group Petrobras. The project, which will include a 150,000bbl/day refinery, is planned to come on stream in 2012 or 2013. Chemical output will include polyolefins, polyethylene terephthalate (PET), ethylene glycol (EG), ethylene oxide (EO) and styrenics.

 

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