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Mahamad Rodzi Abdul Ghani




Mahamad Rodzi Abdul Ghani


The Star



Vitaoils zeroes in on China
Saturday March 5, 2005 - PALM oil and edible oil products maker MMVitaoils Sdn Bhd (MVSB) plans to make China one of the biggest markets forits liquid cooking oils and solid fat products, including margarine andshortening, by early next year.

Managing director Mazlan Muhammad said the company targeted to export atleast 100 containers of its products a month to China by next year becauseof its capacity improvement.

"Everybody wants to go to China. Definitely we want to expand there butChina is too big for us. We want to ensure that we are ready.

"We don’t want to jump on the bandwagon. Once we have increased our funds,then we can concentrate fully on China," he told StarBiz. He foresees thatChina will be one of the company's biggest export markets.

"We have identified good potential partners. It will take time tounderstand China, as its culture is totally different. We understand theEuropean market and its banking system better," he added.

China, the European Union, Pakistan and India are now major importers ofpalm oil.

Mazlan said MVSB was currently only exporting between 10 and 20 containersof its products to China.

Mazlan Muhammad showing some of the company's palm oil and edible oilproducts.

He said although the company’s market share in the downstream palm oilbusiness was very small, it was the most aggressive in expanding itsexport markets.

Other leading local producers of palm oil and palm oil by-products are theKuok Group, Lam Soon Group and Ngo Chew Hong, which have their own niches.

MVSB recently signed an agreement with Malaysian International MerchantBankers Bhd as the lead arranger for a proposed issuance of RM70milMurabahah commercial papers to finance its current debt of around RM20mil,expansion plans and working capital requirements.

The company, Mazlan said, planned to set up a RM30mil factory to increaseits production to 600 full container loads (FCL) or 12,000 tonnes a monthby the end of next year from its current monthly capacity of 400 FCL or8,000 tonnes.

He said the company also planned to focus on other up-and-coming marketsincluding Central Asia, Kazakhstan, Uzbekistan and Russia.

He said that presently, 97% of MVSB’s revenue came from foreign markets,of which 40% was from Europe and 30% from African continents with the restfrom the Balkans, Russia, China, Australia, India and Central Asia.

For the financial year ending Dec 31, 2005, Mazlan said the company wastargeting revenue of RM120mil and net profit of RM8mil.

"We expect a big jump next year. We project a revenue of around RM180milin 2006," he said. For 2004, MVSB reported revenue of RM45.6mil and netprofit of RM2.2mil compared with revenue of RM28.7mil and net profit ofRM1.2mil previously.

Shortening product and margarine contributed at least 70% of the company'srevenue, Mazlan said.

Its shortening product under the brand Qualistaste is used as a fryingmedium for industrial purposes. It contains beta prime crystalline, whichis essential for baking breads and cakes.

MVSB also produces Rise & Shine, which is non-hydrogenated table margarinemade from a blend of palm oil and sunflower oil; Blossom margarine, whichdoes not require refrigeration, from palm oil blended with palm kerneloil; and Marvelloso multipurpose margarine for industrial applications.

Mazlan said MVSB was now looking at the hospitality market such as hotelsand catering houses in Europe and Central Asia.

He added that the company planned to increase its range of packaging inevery export market as each country had different culture, climate andsurrounding.

On the domestic front, Mazlan said MVSB would maintain local sales of itsproduct at 3% of total revenue.

"We don’t want to take risks as we are new. We need to have a fast-growingcash flow. It is better to deal with the overseas market as they haveproper terms of payment. The most we can grow locally is to 5% (ofrevenue)."

On how the company would maintain its competitive edge, he said MVSB hadformed a research and development (R&D) collaboration with the MalaysianPalm Oil Board (MPOB). He said the company set aside RM600,000 annuallyfor R&D.

According to Mazlan, the outlook for downstream market is positive, asscientists have begun to accept the good value of palm oil products whilethe price of palm oil is more competitive than soybean oil.

He said the manufacturing sector had also begun to switch from soybean oilto palm oil because it could last longer than soybean oil.

"When we started in 1999, people had the perception that palm oil is cheapwith no added value. The MPOB has done a good job in meeting scientists inforeign countries, countering the misconception and pushing the localbrands."