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Published on March 10, 2008

Given the unfavourable economic environment, plastic-product-maker Srithai Superware plans to bring down its manufacturing costs by adopting a new disposable-product machine.

"The company this year expects to invest at least Bt100 million on a new machine to produce disposable plastic pallets from used

plastic and other waste," said chairman and president Sanan Angubolkul.

This investment is part of Srithai's five-year business-expansion plan.

The company will spend Bt2.1 billion on production expansion. That breaks down to Bt1.5 billion for plastic containers, Bt500 million for melamine and Bt100 million for the direct-sales business, Sanan said.

Srithai Superware is a major local manufacturer of melamine and plastic products.

"Plastics amount to 70 per cent of the company's raw-material costs," Sanan said. "Plastic prices are on the rise, and this was a major factor contributing to the company's sharp drop in profits last year."

Meanwhile, the company could not adjust its selling prices to cover the increasing raw-material costs. This was exclusive of posting a loss in foreign exchange as a result of the baht's appreciation against the US dollar.

Last year, Srithai recorded a net profit of Bt174 million, down 56 per cent from Bt396 million in 2006.

Moreover, the company wants to seek new markets to generate greater revenue this year, said Sanan.

He said virgin plastic nowadays cost Bt56 a kilogram, while used plastic was only Bt15 a kilogram.

At present, Srithai produces reusable plastic pallets that are used to carry heavy products in many industries.

The company uses 20 kilograms of virgin plastic to produce one plastic palette, calculated at Bt1,120 apiece.

For the new disposable product, the company cannot calculate at the moment how much used plastic would be needed to produce one palette.

Sanan said industries had to use palettes to carry their products while they are transported. The price of one plastic palette ranges from Bt800 to Bt2,000, depending on size. Industries have shifted to wood palettes from plastic, due to lower costs of only Bt200 to Bt600 apiece.

Nevertheless, wood does not work for some industries, such as food, because damp wood can damage food products.

At present, the petrochemical industry demands at least 100,000 palettes a month.

Greater demand comes from the electronics and consumer-products industries, although the company does not have exact figures, Sanan said.

"I estimate that the price of disposable plastic palettes will be Bt350 to Bt400 apiece. So industries can save money if they switch to our new product. And this is also a chance for us," he said.

Sanan says Srithai is the first company in Thailand to implement the new technology. It plans to purchase used plastic materials from plastic plants and garbage-disposal plants of the Bangkok Metropolitan Administration.

Srithai plans to purchase the new machine in the third quarter and start operations in the fourth quarter. The company will produce disposable plastic palettes with a full production capacity of 60,000 units a month.

The company expects more than Bt250 million in sales of pallets, up from Bt200 million before.

Al though providing only a 10-per-cent share of its revenue, the disposable-pallet business shows bright prospects, because the machine can produce other packaging, such as fruit containers.

Sanan said Srithai had targeted increasing total revenue from Bt5 billion this year to Bt10 billion in the next five years, with 65 per cent coming from plastics and the rest a combination of melamine and direct sales.

Last year, Srithai generated Bt4.7 billion in revenue.

Kim Eng Securities (Thailand) forecasts in its research that Srithai's net profit this year will not be better than last year, because plastic-material prices will continue to be high, and the company cannot adjust product prices to cover the increased cost.

However, the broker believes the company can keep its gross profit margin at more than 20 per cent, due to shifting its focus more to high-priced products and widening its export proportion.

Nalin Viboonchart

The Nation