"Ancom is one of the only herbicides synthesizers of certain active ingredients for crop protection in the region."

Lee Cheun Wei

MD / GROUP CEO, ANCOM NYLEX BERHAD (ANB)

July 07, 2023

Since taking over as CEO in 2018, ANB has gone through a transformation to consolidate the chemical business. Can you explain?

Ancom was established in Malaysia in 1969, as a producer of agrochemicals and herbicides, but became a large, diversified group, with stakes in different sectors, like education, media, and engineering. From 2018 onwards, we re-focused the business on our core strength by bringing the chemical businesses under one roof, while letting go of our non-core assets. Last year, we made an offer to buy the remaining 50% of shares of Nylex, which was a publicly listed company with 50% of shares owned by Ancom. Nylex is now integrated as a fully owned subsidiary under ANB. We are also half-way through the process of completing the acquisition of the infrastructure chemical businesses. Presently, ANB is divided in three key divisions: Agrochemicals, Industrial Chemicals and Infrastructure (Logistics) for Chemicals, where we have one vessel for bulk liquids, a fleet of 100 ISO tankers, as well as a tank farm with a storing capacity of 44,000 m3 at Port Klang and 10,000 m3 at Kuantan Port. ANB is listed in Malaysia and has a large institutional component, with 30% financial institutions on our register.

Could you elaborate on your product portfolio?

We currently produce six active ingredients for herbicides used in sugarcane, cotton, palm oil, and soya bean plantations. About 50% of our revenue in agrochemicals comes from the sugarcane industry, but in Southeast Asia, we are mostly involved with the palm oil industry, whereas in the US we cater to the cotton industry. Our proprietary solutions are sold to about 40 countries, the top five export destinations being the US, Brazil, Australia, South Africa, and Thailand. In Brazil, the sugar cane is used in proportion of 50% in the food industry, and the remaining is used as a feedstock to make ethanol for biofuel. On the industrial chemical side, we produce plastic polymers like PVC and PU, phosphoric acids, adhesives and ethanol. We are one of Petronas’ key distributors for methanol.

As one of the only herbicides active ingredients (AI) producers for crop protection in Southeast Asia, how do you leverage this unique positioning in the market?

Ancom is one of the only herbicides synthesizers of certain active ingredients for crop protection in the region, whereas most agrochemical players are formulators that procure the AI and mix it into different combinations to obtain the end-product. Outside of China and India, the AI market is very limited due to high entry barriers. As one of the only producers of AIs in the region, Ancom enjoys a strong competitive advantage. Also, being in Malaysia grants us further benefits as Malaysia is rather politically neutral internationally. To our customers, we are often seen as “China +1” or a solution outside of China. Many events in the past such as policy changes, unexpected plant relocation, covid pandemic etc. have made China a less reliable supplier.

What is your growth strategy moving forward?

The agrochemical business will continue to drive our growth. Agrochemicals contribute approximately 30% of our total revenue, whilst industrial chemicals and infrastructure division make up for the remaining 70%, but, in terms of profitability, agrochemicals account for 70% of the group profits. We are constantly looking for new AI to add to our product portfolios. We aim to capitalize on our strategic and competitive advantages of being the only herbicides AI producer in the region. Not many people are aware that the time taken to introduce a commercially sellable AI to the market is somewhere between 4 to 5 years from the time a product is decided. To be able to register the products with the respective pesticide boards in any given country the company needs to conduct many field trials, impurity studies, efficacy tests, GLP lab report on the products and toxicology study on the environments. The industry is highly regulated due to its sensitive application in the agricultural sector which is important to the human food chain. In short, the strategy is to focus on our core competency and continue to take leverage on our competitive advantage in being a herbicide AI producer.

ANB posted very high profits over the past years. How do you expect the business to perform in 2023?

Our share price has improved significantly over the past three years, as a mark of our improved profitability following the business transformation in the Group. This year, everybody is expecting recession, especially in the US, but growth is still on the table in APAC. China’s reopening will have a multiplier effect on demand due to its huge spending force. In the business of providing solutions for big acre crops necessary for the global food supply chain, we are perhaps less affected by the potential recession; the only volatility we perceive is at the price level. There seems to be average selling price (ASP) downtrend in the pesticide sector in 2023 generally. The ASP can fluctuate due to supply and demand conditions and also raw material price movement. As many of our products have crude oil as raw material, there is likely a positive correlation between ASP and the crude oil price movements.

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