Among commodities suffering from the decline in the price controlled by a demand, or the need under fluctuating economic conditions, and a supply, or production capacity, sugar industries inevitably belong to this cycle.
Chief Executive Officer of Buriram Sugar Public Company Limited (BRR) Mr. Anan Tangrongwejakit said that, in the previous year, the price of sugar considerably dropped due to excessive amount of sugarcane worldwide. This is a cycle of agricultural products as reflected by the fact that, in the past 2 years, the world market had rather huge amount of sugar, especially the market in Thailand, India and Brazil, thanks to good weather condition.
The business results of the past two years (from 2017 to 2018) showed that the BRR had small net profits of 524.73 and 271.62 million Thailand whereas its income was 5,928.18 and 5,916.67 million Thai Baht respectively.
Due to the small net profits the company gained, the BRR’s business plan needs to be remodeled by attempting to adjust and distant itself from commodity-type products as the proportion of the company’s major income (around 70% to 80%) previously came from sugar. As a result, the company has resolved to introduced 3 new projects to continue its existing business, hoping to create new growth.
The first project of the BRR features purification of white sugar. That is, raw sugar will be transformed into the one with quality. The company started the project in the middle of last month and the product is expected to be on sale in the 3rd quarter this year. Normally, the company sells raw sugar at 60-90 US Dollars per ton for American commodity markets. The purified white sugar, by contrast, will be sold in London, enabling the company to earn more.
Energy saving is another project initiated by the BRR to reduce energy used at sugar factories so that remaining amount of bagasse left during sugar production is over 100,000 tons. This project was already launched and the next sugarcane pack is expected to be completely processed. Doing so will results in more amount of bagasse to support electricity generating business.
The third project is a factory to produce alternative containers to replace the ones made of foam and plastic. Certainly, bagasse is used as a raw material to produce plates, bowls and glasses. The new products will come out in August, 2019. In the first phase, there are 14 production lines with capacity of making between 850,000 and 1,000,000 pieces daily under investment value of around 300 – 400 million Thai Baht. The exact income will be acknowledged in the 4th quarter of this year.
At present, around 80-90% of purchase orders are being made by foreigners. The price per unit is around 0.10-0.11 Thai Baht per gram. The third project consists of 4 phases with production capacity of around 4 million pieces. The 2nd phase will start in 2020 and 100 million Baht will be used as an initial investment fund.
“We’re trying to install a machine as major market is especially from overseas, particularly the US and Europe. We also would like to sell 10% of our products in Thailand with an aim to be a business leader here. We believe we can do thanks to plenty amount of raw materials like bagasse. So, our production expenses are lower than others, enhancing our competition capacity,” said Mr. Anan.
From 2018 to 2019, the BRR has 238,000-Rai plot of land for sugarcane farming. The total of 2,931,277 tons of sugarcane harvested could produce 353,349 tons of sugar, 137,443 tons of which were raw sugar. From 2019 to 2020, the same area can produce 3,100,000 tons of sugarcane for production of 350,000 tons of sugar, 140,000 of which will be sold as raw sugar.
In terms of investment, the BRR is at present considering to invest in construction of a new sugar factory with a couple of partners. The investment is worth around 5,000-6,000 million Thai Baht. Currently, environmental impact assessment (EIA) is being carried out and results will be finalized in 2010.
Mr. Anan concluded that, last year, the company developed further as it used by-products from its own sugar factory for utmost benefits. The factory is expected to produce up to 3 million tons to facilitate the company’s existing continuous business.