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Business Overview

     
CHEMICALS BUSINESS
 

Chemicals Business has demonstrated its resilience and adaptability to consistently and sustainably deliver excellent performance both in the short-term by lessening the impact of the COVID-19 pandemic, and in the long-term by focusing on creating new innovative high value-added products and solutions to serve the new normal demand and entering into Circular Economy-related businesses. Furthermore, the business has developed and utilized digital technologies to manage the business across the value chain, enhancing the company’s competitiveness efficiently.

OPERATING RESULTS

In 2020, Chemicals Business recorded sales revenue of 146,870 Million Baht, decreased 17 % from 2019 mainly from the drop in product prices and lower sales volume. EBITDA declined 4% from year 2019 to 30,965 Million Baht due to lower dividends from associates. Profit for the period increased 14% from year 2019 to 17,667 Million Baht as a result of higher product spreads.

BUSINESS CHALLENGES

In 2020, Chemicals Business confronted major challenges from the COVID-19 pandemic, which significantly impacted the global economy, notably in automotive and durable products segments that were tremendously affected by the lockdown policy to prevent the outbreak. Besides, an increase in the new petrochemicals capacity also resulted in lower product prices compared to the previous year. At the same time, travel restriction policy consequently caused the drop in demand and prices of crude oil, resulting in decreased raw material cost and supported product price spread.

KEY ACHIEVEMENTS FROM TIMELY BUSINESS ADJUSTMENT

Business adjustment to mitigate the impact from the COVID-19 In the midst of the COVID-19 pandemic, Chemicals Business swiftly and timely adapted its working procedures aiming to minimize the risk of infection to employees and their families, and still enabling the business to continue operations efficiently. Some examples include allowing employees to work from home, supporting equipment and digital tools, and transforming towards the “New Way of Working” in terms of process, place, and technology.

For manufacturing, the operating procedures were redesigned to ensure the continuity in production by separating critical staffs working in critical areas to reduce the risk of infection. Consequently, none of the production lines, both in Thailand and overseas, was affected. For sales, Chemicals Business adjusted the product portfolio to support the rising demand of products related to food and beverage packaging and industrial packaging, and increased the sales to countries with low-impact from lockdown. Additionally, the business improved the sales process flexibility with digital technology, resulting in sales volume maintained at a high level.

Key construction projects were able to progress smoothly without any interruption. Long Son Petrochemicals (LSP) project execution was adjusted by implementing a remote inspection and consultation with third-party experts to examine machines before importing to Vietnam, leading to project progression as planned without any outbreak in the project area. Similarly, to minimize the risk of the COVID-19, Map Ta Phut Olefins Company Limited postponed the schedule of plant turnaround from the second quarter to the fourth quarter of 2020. The Green Turnaround model was implemented throughout the maintenance process.

Moreover, Chemicals Business collaborated with a wide range of professionals, including engineers, designers, healthcare staffs and experts, to develop innovative products and solutions to prevent the outbreak and reduce the risk of contraction to the healthcare personnel. Some products included patient guard for dental work (Dent Guard), Negative Pressure Isolation Room, Negative Pressure Patient Isolation Capsule, etc.

RESILIENCE TO RECOVER AND CHANGE TO EMERGE STRONGER

Business improvement through digital technology

  • Improvement in value chain management Chemicals Business applied the Digital Commerce Platform (DCP) to improve the connection between customer’s purchasing orders and supply chain management, shortening customer response time by 70%. It also allowed customers to track their orders anytime and anywhere, which conformed to the “New Normal” working model. Besides, Chemicals Business could leverage the database from the system to improve value chain management speedily and precisely. In addition, digital technology was implemented in market prices analysis both internally and externally in order to assess raw material prices and purchase timing making the raw material procurement more efficient and corresponding to the market situation. Furthermore, the business also developed a system prototype to collect new product development information and simulate production models, leading to shortened time in product development as well as speedy product launch in response to customer needs.
  • Improvement in production process Chemicals Business applied digital technology and Internet of Things (IoT) to increase the company’s competitiveness in various ways, such as collaboration with a world-renowned partner to develop a predictive maintenance system using Artificial Intelligence and Machine Learning, and implement it with machines in all main manufacturing plants. As a result, the system could detect more than 100 times of machine malfunctions prior to machine failures occurring, and it could also be commercialized as a solution to external customers. Additionally, the business partnered with a global academic institute to produce IoT devices, such as a sensor to detect corrosion under insulation and a sensor to analyze electric motor condition using Data Analytics, and integrate with a digital platform to create a service solution as well as reporting application for quick decision-making.

Sustaining leadership in ASEAN market

Chemicals Business is currently in the construction phase of the first petrochemical complex in Vietnam, which fully integrates upstream petrochemicals plants with downstream units. The construction progress is on plan and the project is expected to start commercial operation within the first half of 2023.

Additionally, Map Ta Phu Olefins Company Limited is in progress of capacity expansion, which will increase olefins production by 350,000 tons per year as well as increase the flexibility in feedstock selection, enabling the business to be more competitive.

HUMAN RESOURCE

Chemicals Business has prepared human resource readiness for both Thai and foreign employees to support the business growth. The business has built people capability with necessary knowledge and skills, to be prepared for any changes and challenges, through several learning channels and forms, such as individual capability analysis and development plan, online learning, scholarships for master’s and doctoral degrees, etc. Chemicals business focuses on customer needs in its people development plan. The business also believes in people value, embrace the social diversity, and support human rights in every working process.

PRODUCT & INNOVATION

Chemicals Business focuses on developing product and solution innovation to ensure customers and stakeholders along the value chain can meet their sustainability goals as well as to solve environmental problems. The business has designated the guideline for product and innovation development for sustainability in 5 areas; hygiene and safety, Circular Economy, climate emergency, clean energy, and water management

  • Innovation Management Process (IMP) Chemicals Business has continuously been successful in developing and executing the Innovation Management Process (IMP). In 2020, more than 400 ideas of product innovation were invented, leading to more than 100 new product development projects an average of 15 new product launches per year with an expected EBITDA of more than 400 Million Baht per year. As for i2P (Ideas to Products) Center in Rayong province, it allowed customers to visit, both in virtual tour and on-site with new normal and physical distancing condition, and understand the business’s product and service innovation. The i2P center received excellent responses from both domestic and foreign customers, resulting in more than 100 ideas of collaboration in product development.
  • Product innovation In 2020, Chemicals Business developed and commercialized 11 new grades of plastic resin to the market in order to meet customer demands in the high-growth industries with product features aiming to support sustainability targets, such as reducing the amount of raw materials, saving time and energy in the production process, etc. Examples of new products included high strength and flowability polypropylene for plastic compound in the automotive bumper application, special polyethylene resin from SMX™ Technology for industrial product application, such as industrial film, consumer packaging with impact resistant, lightweight cap for carbonated soft drinks, and intermediate bulk container (IBC) with high strength and chemical resistance, etc. Furthermore, Chemicals Business also continued to upgrade the floating solar solution in order to achieve the aim of enhancing renewable energy. The business developed pontoon systems which can be installed in various forms, connect with many types of solar cells, and support the weight up to 200 kilograms per square meter. In 2020, the floating solar business grew 260% and recorded a total of 25.8 megawatts installed capacity.
  • Solutions for Circular Economy To meet an increasing demand of brand owners and consumers following the concept of Circular Economy, Chemicals Business has partnered with a global recycling company to produce high quality post-consumer recycled (PCR) polyethylene resin from municipal waste. This solution is a combination of Chemical Business’s innovation and special formulating technology as well as the collaboration with the world-class partner, aiming to be the first company in Thailand to receive EuCertPlast certification. Chemicals Business also promoted waste recycling in the community through “KoomKah”, a web application for data management targeting to increase waste banks’ efficiency and encourage waste sorting. KoomKah currently has more than 8,000 memberships and record 1,493 tons of sorted recycled waste. Besides, the business has cooperated with Thailand Institute of Packaging and Recycling Management for Sustainable Environment (TIPMSE) to promote KoomKah in waste banks in Loei province, and joined forces with the Amata Group in developing waste management system “KoomKah Smart Manifest” to be used in Amata’s industrial estate with more than 500 factories. Chemicals Business also invested in the development of new chemical recycling technology as an alternative for sustainable waste management. The product from the process can be used as a raw material in olefins and polyolefins production in order to produce high quality green polymer resin. The construction of the first demonstration plant was completed at the end of 2020, and it is expected to start trial operation in early 2021. In addition, aiming to conform with Circular Economy principle, the business is currently in the process of developing new products to support 100% recyclable flexible packaging,

SUSTAINABLE DEVELOPMENT IN BUSINESS OPERATIONS

Innovation for society and environment

Chemicals Business conducts business according to the United Nations’ Sustainable Development Goals (SDGs) to achieve sustainable development in areas of economy, society and environment. Focused areas are to improve the quality of life in the community, to promote the use of resources to the maximum benefit according to Circular Economy principle, and to reduce global warming.

Moreover, Chemicals Business has been promoting “Online way of living” to the community by launching “Rayong Shop Hi”, an online marketplace on the Facebook platform and offering suggestions on how to promote products on the marketplace and deliver products in order to create income for communities during the COVID-19 crisis. The business also supports community enterprise projects to achieve continuous growths and developments, collaborate with Map Ta Phut police and Don’t Drive Drunk Foundation to continue to create a safe community in Rayong through ‘The Lifesaver in School’ project to create awareness and promote road safety behaviors.

Chemicals Business has collaborated with various organizations and network of partners to undertake marine protection missions. Examples include The Ocean Cleanup, Alliance to End Plastic Waste (AEPW), and Ellen MacArthur Foundation, which the business has worked together to sustainably solve waste problems, especially in the ocean. The business has also moved forward to tackle marine debris problem with “SCG – DMCR Litter Trap Generation 2”, a new innovation upgraded from the first model by using a special-grade plastic HDPE-Bone, resulting in higher efficiency of waste collection, UV resistance, and service life. Moreover, the litter trap is recyclable, in line with Circular Economy concept. 37 sets of the litter trap have been installed in 17 provinces nationwide and are able to collect more than 49 tons of waste. (as of the end of 2020)

Chemicals business has also educated youths in sorting and collecting plastic wastes from the origin through “Recycled Chairs from Repurposed LLDPE Milk Pouches” project by washing and drying the school milk bags, and then collecting the bags as LLDPE plastic that can be sold and reused as a material to produce “Recycled Chair” that is well-designed and durable. The business has also expanded the results of the “Recycled Plastic Road” project through cooperation with companies such as SC Asset Corporation Public Company Limited, Amata Corporation Public Company Limited and CP All Public Company Limited. Currently, the prototype of asphalt concrete road with plastic waste as a raw material has a total length of 7.7 kilometers and has recycled plastic waste by 23 tons. In addition, the business has signed a collaboration with Department of Highways, Department of Rural Roads, Dow Thailand Group and Chiang Mai University to explore and develop ways to use plastic waste in asphalt concrete for road construction to deliver the road with improved performance and lifespan, in line with the government’s BCG Economy (Bio – Circular - Green Economy) policy.

In respect of continuously maintaining production process standards at a high environmental-friendly level, RIL Industrial Estate has been certified as eco-industrial estate at “Eco-World Class” level with the highest score, from Industrial Estate Authority of Thailand (IEAT). RIL Industrial Estate is Thailand’s first industrial estate to receive this award for 2 consecutive years, emphasizing the business position as a role model for industries that are responsible for the development of quality of life in communities and the environment.

Chemicals Business Consolidated Financial Information (Million Baht)

  2020 2019 2018 2017 2016
Information from Statements of Financial Position*
Current assets 55,275 49,258 55,241 45,183 49,463
Assets 283,614 230,543 213,263 193,183 193,465
Liabilities 125,102 76,364 57,028 49,257 64,321
Shareholders' equity 158,512 154,179 156,235 143,926 129,144
Information from Income Statement*
Revenue from sales 146,870 177,634 221,538 206,280 188,163
Cost and expenses 130,668 167,535 196,813 169,512 147,209
Profit for the year ** 17,667 15,480 29,166 42,007 42,084
EBITDA *** 30,965 32,258 46,117 64,461 60,731

* The figures for year 2019 are reclassified and the business segment information for year 2018 and 2017 are restated.
** Profit for the year attributable to owners of the parent.
*** Profit before finance costs, income tax expense, depreciation and amortization and includes dividends from associates.