Unilever on track to launch olein plant

The Jakarta Post | Business | Tue, September 09 2014

PT Unilever Oleochemical Indonesia, the sister company of consumer goods producer PT Unilever Indonesia (UNVR), will be ready to test its facility later this month before launching full operations next year.

Once Unilever Oleochemical is fully operational, it will supply olein to Unilever Indonesia which so far relies on imports.

Unilever corporate secretary Sancoyo Antarikso said over the weekend that the oleochemical facility was ready for pre-operational testing and would be completed soon.

“Hopefully, it [the plant] will begin its commercial operations, as scheduled, next year,” Sancoyo said.

The facility, he added, would have a production capacity of 165,000 tons of olein per year.

Olein, a palm-oil derivative, is commonly used for a variety of personal and household products as well as for cooking and baking.

“Most of the output from the facility will be exported,” he said, adding that a smaller proportion would be used to supply Unilever.

According to Sancoyo, around 20 percent of the total annual olein production would go to Unilever and the remainder would be exported to countries in Asia, Africa and Europe.

Unilever Oleochemical launched construction on its Rp 1.5 trillion (US$127.12 billion) oleochemical plant in the special economic zone of Sei Mangke, North Sumatra, last April.

Being considered a pioneer in olein production, the company has been awarded a five-year tax holiday by the government.

Unilever Olechemical is 99.9 percent owned by Mavibel BVM and 0.1 percent by Marga BV. Both Mavibel and Marga are units belonging to Unilever NV/Plc, the global parent company.

As a sister company, Unilever Oleochemical will not be consolidated within Unilever Indonesia’s own operational and financial reports. However, its olein production, which will be supplied to Unilever, would help to reduce the latter’s operational expenses by not having to source all its materials abroad, according to Sancoyo.

Unilever’s reliance on imported raw materials has affected the company’s financial performance amid the recent currency volatility. Around 60 percent of the company’s total raw materials are purchased in foreign currencies.

Unilever, an Anglo-Dutch multinational based in London, reported an almost 14 percent year-on-year (y-o-y) increase in revenue during the first half of this year, hitting Rp 17.58 trillion.

Its bottom line, however, sat at Rp 2.85 trillion for January to June, up only slightly from the Rp 2.82 trillion gained during the same period last year due to the high level of imports and rising costs.

To mitigate the high level of imports and expenses, Unilever increased its selling price by 5 percent in March.

Sancoyo said the company would not raise its product prices again this year, unless president-elect Joko “Jokowi” Widodo raised fuel prices by more than Rp 500, which would impact the company’s performance.

Unilever Indonesia has earmarked around Rp 1.4 trillion for capital expenditure (capex) this year, primarily to boost the capacity of its factories and improve brand innovation in the second half of this year.

With regard to the first half, Sancoyo said the company had disbursed Rp 700 billion evenly among each of its business units.

Unilever produces and distributes around 30 brands of food, home and personal-care products nationwide.

Sancoyo added that home and personal care dominated the company’s income, contributing more thean 70 percent to Unilever Indonesia’s overall revenue.

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