Thai-Lysaght sees lower sales as zinc price declines

Managing director Korntawat King-ngoen said yesterday that despite the resumption of orders in the second quarter, the price of zinc ingot had sharply declined from US$1,900 (Bt64,277) per tonne last year to $1,300 this year.

This means the company has had to lower the price of its zinc-oxide powder accordingly. It currently sells it at Bt55 per kilogram, against Bt80 last year.

He said the decline in ingot prices and the strengthening of the baht had prompted the company to focus more on the domestic market. Revenue from domestic sales currently accounts for 85 per cent of income, with the remaining 15 per cent coming from overseas.

Thai-Lysaght's main overseas markets are in Asia, New Zealand and Australia. Burma is a new market for the company this year.

Korntawat said the company had earlier predicted that its sales volume this year would drop by 25 per cent to 10,000 tonnes. This is because major clients in the tyre industry have been directly impacted by the economic recession and have had to reduction their production capacity.

However, the company has revised upward its forecast to 13,000 tonnes after receiving orders from other industries, namely, companies in the animal feed, ceramics and cosmetics industries.

The expected sales volume of 13,000 tonnes will be close to Thai-Lysaght's full production capacity of 14,400 tonnes a year, he added.

"Those industries were not so affected by the economic recession. Moreover, some clients who previously switched to using zinc oxide from China have come back to us because they experienced that the quality of the Chinese product was lower than ours," he said.

Rising orders from outside the tyre industry this year account for 50 per cent of Thai-Lysaght's sales, against 25 per cent in previous years.

Korntawat said the tyre industry was however still regarded as the company's main revenue contributor in the longer run. When the economy recovers, the contribution

from the segment is expected to pick up.

He said the company had started trial production of granular zinc oxide for the tyre industry. The product will be launched commercially at the end of the year.

Customers have said granular zinc oxide is easier to use in their production process than zinc-oxide powder, he said.

Korntawat said the company might increase overall production capacity by 30 per cent next year if the economic situation turns around. Earlier it had planned to spend at least Bt15 million to increase capacity this year, but later suspended the plan due to the economic downturn.

He said the decision to lift capacity next year depended on the approval of the board of its parent company, Univentures. Univentures owns 100 per cent of Thai-Lysaght.

Zinc-oxide business accounts for 70 per cent of Univentures' revenue.