By Ooi Tee Ching

Published: 2009/09/08

Carotech Bhd (0076), a producer of palm oil nutrients, has received bids from foreign and local investors for its business, but its owner is not planning to sell.

"We get queries from investors, both local and overseas, from time to time. But there are no serious offers on the table," said Carotech managing director David Ho Sue San.

Carotech is 58 per cent held by Hovid Bhd, and Ho in turn controls Hovid with a 50.16 per cent stake.

Set up in 1992, Carotech is the first integrated company in the world to commercially extract vitamin E, mixed carotene complex and phytosterols from palm fruits.

Having pioneered the business of extracting and selling palm tocotrienols for medical and anti-aging use, Ho said he is committed to run Carotech for a long time more.
"As the medical benefits of palm tocotrienols gain visibility over the years, people see the potential lucrative returns of this business," he told Business Times in a telephone interview from Ipoh yesterday.

Recently, Carotech posted a loss of RM17.46 million in the year ended June 30 2009. This was a big plunge from RM7.21 million profits a year before.

Ho explained that the loss was mainly due to a stronger US dollar, which means that its US dollar loan in ringgit terms will be higher.

About 60 pert cent of its total borrowings are in US dollar.

"Consequently, we registered a RM15.6 million unrealised forex loss. This is an unrealised accounting loss which has no significant immediate impact on our cashflow. 

"If not for this unrealised forex loss, Carotech would have been in a break-even position," Ho explained.

Carotech completed its plant expansion in January 2009. This means the somewhat dismal RM137 million revenue posted in 2009 only reflected the six-month performance of the expanded capacity.

Ho assures that 2010 numbers will be better.

Still, Carotech's gearing, a measure of debt level, is high at 3.6 times, and the group plans to cut this by raising up to RM45 million from a rights issue.

Ho is also confident that higher interest costs will not be a problem as higher revenue will help it cover the payments.

"The demand for methyl ester for fuel and for raw material in the oleochemical sector is stable," he said.

In the first half of the year, Carotech sold about 30,000 tonnes of methyl ester for fuel to Singapore-based oil and gas trader Trafigura.

For the rest of the calendar year, Carotech is expected to sell another 30,000 tonnes of biodiesel, worth some RM100 million.