ADB to cement profits through added value
Firm faces price, competition growth
MAI-listed Applied DB Plc (ADB), a maker of plastic compounds, adhesives and sealants, is planning to revamp its business performance with higher value-added products to drive up profit and revenue.
“This industry has seen fierce competition from many peers,” said chief executive Wang Wanapaison. “We have to focus on a variety of new products with higher prices such as grades of polyvinyl chloride compound [PVC] and glue. We are also expanding our export markets, so we have to do more R&D activities.”
He said ADB has been looking for business upgrades every year because supply and demand has changed rapidly over the last decade.
Although demand for plastic products is still high, more competitors have joined the industry.
A major factor is the high fluctuation of raw material prices for PVC and adhesivebased materials, which are based on global oil prices.
ADB estimates the average oil price this year will stay in a range of US$72-74 per barrel, up from $60 last year.
Mr Wang said another factor is disruptive technology, which could reduce the need for some PVC and adhesive products.
“Shoe makers, for example, may require less adhesive-based material, or wire makers may use less PVC, so we have to look for new businesses to diversify,” he said.
Mr Wang said ADB is looking for a merger or acquisition in biotechnology or cosmetics to tap those global market trends.
For the development of PVC and adhesive products, ADB plans to emphasise R&D to create higher value-added products.
R&D funding will be allocated on a caseby-case basis, so an exact annual estimate was not forthcoming.
New products being eyed include medical-grade PVC to serve the Japanese market and a halogen-free PVC free of toxic emissions in the event of burning wires.
“Last year, ADB successfully developed medical-grade PVC and its first production line started operating for Showa Global, which is ADB’s main customer and also a shareholder,” said Mr Wang.
“The first medical-grade PVC shipments total 100-200 tonnes per month.”
He said mass production of medicalgrade PVC is set to begin in the third quarter.
For halogen-free PVC, ADB aims to produce a sample product that meets the country’s industrial standards this year.
Other high value-added products are being developed, such as a water-based supernal adhesive and an environmentally friendly acrylic sealant.
ADB was established in 2005 as a joint venture between Applied Chemical Industry Co, a PVC maker, and DB Chemical Co, an adhesive maker.
The two firms were formerly set up in 1983 and 1985, respectively.
During its first stage, ADB focused on general adhesive products for shoemakers, as Thailand was a global hub for footwear production at the time.
The plastic and adhesives industries have flourished in emerging markets like Thailand, which are gradually shifting from labour-intensive industries to higher technology.
In line with that trend, shoe production began to slow in Thailand. But PVC became a major feed stock for wire makers, while Thailand’s construction and property sectors have been bullish for decades, prompting ADB to shift its focus there.
Sealant products were also introduced to the local market, giving ADB another revenue and profit generator to avoid the downturn in the shoe-making sector.
Mr Wang said access to Thailand’s lowcost financial market is another factor that can help ADB further its business.
The company decided to list on the Market for Alternative Investment last November, for which it pulled in 230 million baht from the initial public offering.
Some of those funds were allocated to expand ADB’s production facility at its factory in Bangpoo Industrial Estate in Samut Prakan province, where it makes PVC, adhesives and sealants.
Pornpiwan Niramonchardchay, the chief financial officer, said ABD expects 2018 revenue to grow by 5-10% from 1.37 billion baht last year, thanks to increasing demand for its products.
Around 80% of ADB’s revenue is generated through local sales, with the rest coming from abroad.