Univanich Palm Oil (3)

Developments

Univanich was listed in Stock Exchange of Thailand in November 2003 after it abandoned its plan to list in Singapore Stock Exchange. Since listing, the company has transformed itself into a leading vertically integrated palm oil player in Thailand. It has invested in research and development in order to improve the quality of oil palm seeds and seedlings to support the growing oil palm industry in Thailand. With all these investments, now the company is capable of producing:

• 15 million germinated seeds per year
• 250,000 clonal oil palms per year
• 1,000,000 oil palm seedlings per year

Key developments over the last 10 years are summarised below:

Year	Key Developments
2001	Expanded TOPI’s milling capacity from 30t/h of FFB to 60 t/h of FFB. Total milling capacity increased to 90 t/h of FFB.
	Started planting oil palm at Lamthap and prepared to construct the third factory at Lamthap.
2002	Abandoned plan to list in Singapore Stock Exchange.
2003	Listed in Stock Exchange of Thailand on 25 Nov 2003.
2004	Completed construction of new factory at Lamthap. Total milling capacity increased to 135 t/h of FFB.
	Started constructing palm kernel crushing factory at Lamthap with crushing capacity of 3 t/h of palm kernel. 50MB was earmarked for this investment.
2005	Completed construction of palm kernel crushing factory at Lamthap. Total palm kernel crushing capacity increased to 8 t/h.
2006	Expanded oil palm seeds production to 10 million seeds per year.
	Completed building Tissue Culture Laboratory.
	Started construction of biogas plant at Siam and Lamthap factory (1MW each).
2007	Purchased new 617.96 rai of oil palm plantation in Krabi for 37.6 MB.
2008	Started construction of third biogas plant at TOPI factory (2MW).
	Completed construction of biogas plant at Siam and Lamthap factory (1MW each)
	Started expansion of biogas plant at Lamthap to 2MW
	Expanded oil palm nursery area in response to increasing demand in its seedlings.
	Purchased new lands at Cha-uat District of Nakornsrithammarat Province.
2009	Completed 2MW biogas plant at TOPI factory.
	Expanded biogas plant at TOPI factory to 3MW.
	Started building oil palm nursery at Cha-uat District (300,000 seedlings per year).
2010	Completed expansion of biogas plant at TOPI factory to 3MW.
	Completed building of new Tissue Culture Laboratory. Total production capacity increased to 250,000 clonal oil palms per year.
	Started commercial sales of seedlings from Cha-uat District. Total seedlings supplying capacity reached 1,000,000 seedlings per year.
	Expanding Univanich Oil Palm Research Centre due to be completed early 2011. Total production capacity of germinated seed will be increased to 15 million seeds per year.

However, planned investment in increased factory capacity at Lamthap to 90 t/h was postponed as a result of low FFB supplied around that area.

Univanich Palm Oil (2)

Industry Overview

 

Oil palm was first planted in Thailand circa 1969 with Univanich as a pioneer in Krabi province. Since then the oil palm industry has developed into one of the major economic forces.

The pace of the growth was further accelerated in the past decade thanks to the first National Alternative Energy Development 2004-2011 and second Alternative Energy Development Plan 2008-2022 which promotes the use of biodiesel derived from crude palm oil. The latest plan calls for a mandatory production of B2 biodiesel and voluntary production of B5 biodiesel from 2008-2010. It indicates that from 2011 onward, B5 biodiesel production will be a compulsory and B10 biodiesel production would be available as an alternative. It forecast that B100 demand would be 3.02 million litres/day (ml/d) in 2011, rising to 3.64 ml/d and 4.50 ml/d over the period of 2012-2016 and 2017-2022 respectively. That equates to the annual CPO production of roughly 1,100 and 1,640 million tonne required just for the biodiesel sector alone in 2012 and 2017 respectively.

Although over the past 10 years, oil palm plantation area rose almost two folds and palm oil production increased sharply, the growth rate was subdued and increase in production to meet rising demand from biodiesel sector becomes more challenging in the past few years.

At the end of 2010, total harvested area for oil palm was approximately 3.55 million rai, a 10.36% increase over the past 5 years. Over the same period, total FFB produced rose from 6.715 million tonne to 8.223 million tonne, albeit crop yield per rai declined from 2,828 kg/rai in 2006 to 2,315 kg/ rai in 2010. And total crude palm oil production was stagnant at around 1,100 – 1,300 million tonne per year, far short of planned quantity required to produce 3 ml/day of B100 in 2011. The slow growth and low productivity are as a result of:

-          Strong rubber price encouraging farmers to favour planting rubber over oil palm.

-          Lack of suitable land for palm plantation. Land is too expensive.

-          Irregular weather pattern adversely affected palm yields.

Table below summarises key statistics of palm oil industry in Thailand over the past 5 years.

ThailandStatistics	2006	2007	2008	2009	2010
Plantation Area (million rai)	2,954	3,197	3,676	3,889	4,077
Harvested Area (thousand rai)	2,374	2,663	2,885	3,187	3,552
FFB Production (thousand tonne)	6,715	6,390	9,271	8,163	8,223
Yield per rai (kg/rai)	2,828	2,399	3,214	2,560	2,315
CPO Supply (thousand tonne)	n/a	1,207	1,661	1,453	1,425
- CPO Production	1,167	1,051	1,544	1,345	1,288
- Opening Stock	n/a	156	89	108	137
- Import Crude Palm Olein	n/a	0	28	0	0
CPO Demand (thousand tonne)	n/a	1,207	1,661	1,453	1,425
- Local Consumption	n/a	834	846	739	734
- Export Refined Palm Oil	n/a	60	92	59	60
- Export Crude Palm Oil	n/a	224	285	67	63
- Biodiesel	n/a	0	330	450	500
- Ending Stock	n/a	89	108	138	68

Sources: Office of Agricultural Economics and Univanich

Office of Agricultural Economics forecast that the harvested area will increase to 3.75 million rai in 2011. Total FFB harvested and CPO produced in 2011 would be 9.12 million tonne and 1.47 million tonne respectively.

 

Univanich Palm Oil (1)

At the onset of 2011 palm oil shortage crisis rocked Thailand. Due to the severe drought encountered in early 2010, the amount of fresh fruit bunch (FFB) reduced substantially in the latter half of 2010 which led to a skyrocketing of the price of domestic crude palm oil (CPO) to the unprecedented record level. Shortly after, cooking palm oil disappeared from the supermarket shelves before the Government untimely decided to import crude palm oil to restore the depleted CPO stock. The crisis, arriving at the juncture when the mandatory on increasing biodiesel blend from 2% to 5% was going to be implemented in early 2011, reinforces the scepticism on the food-for-energy policy. By all means, a few things have been proved. First, there is a strong demand for crude palm oil. Second, when the weather is bad the supply could be constraint. Thus this will likely support the product price at a high level.

Univanich Palm Oil, a leading oil palm grower and crude palm oil producer in Thailand, could be a beneficiary for the yet-to-be-unfold trend. Its palm oil plantation area of almost 40,000 rai (6,400 hectares) in Krabi produces over 100,000 tonne of fresh fruit bunch (FFB) annually feeding its three oil palm crushing mills with a combined milling capacity of 135 tonne of FFB per hour (1,134,000 tonne of FFB yearly). It also sourced about 85% of total FFB processed from outside growers to maximize the plant’s capacity. Over the past 5 years, Univanich processed averagely 750,000 tonne of FFB each year and produced approximately 150,000 tonne of crude palm oil and crude palm kernel oil per year which can be exported through its deepwater port at Laemphong, Krabi.

Table below exhibits historical key production statistics of the company.

	2006	2007	2008	2009	2010
Gross Plantation Area (rai)	38,088	39,058	39,058	39,144	39,177
Harvested Area (rai)	34,607	34,607	34,408	34,160	35,121
Total FFB processed (tonne)	732,349	687,212	867,593	792,250	735,897
- Owned FFB (tonne)	128,161	101,707	150,904	114,876	110,385
- Outside FFB (tonne)	604,188	585,505	717,499	677,374	625,512
Total Palm Oil Production (tonne)	147,800	133,600	167,700	148,400	134,700
- Crude Palm Oil (tonne)	130,654	116,578	146,204	129,182	116,686
- Crude Palm Kernel Oil (tonne)	17,146	17,022	21,496	19,218	18,014
Crop Yield (kg/rai)	3,703	2,939	4,362	3,363	3,143
Oil Extraction Rate (%)	20.2%	19.4%	19.3%	18.7%	18.3%
- CPO Extraction Rate (%)	17.8%	17.0%	16.9%	16.3%	15.9%
- PKO Extraction Rate (%)	2.3%	2.5%	2.5%	2.4%	2.4%

In addition, Univanich has its own Oil Palm Research Centre and Tissue Culture Laboratory. They are capable of producing 15 million germinated seeds and 250,000 clonal oil palms per year.

Interestingly, it joins the United Nation’s Clean Development Mechanism in an effort to reduce the carbon dioxide emission. All three biogas plants are registered under the scheme and have earned about 90,000 Certified Emission Reduction (CER) credits. The electricity generated is sold to EGAT under VSPP creating addition income stream for the company.