Top Thai Oil Refiner Hopes Vegan Meat Will Bolster Business

(Bloomberg) -- Bangchak Corp., one of Thailand’s top oil refiners, is targeting the bioplastics and plant-based meat industries to diversify its business.

The move is part of a strategy of focusing on value-added products rather than just commodities sectors, President Chaiwat Kovavisarach said in an interview.

“The market has really picked up for alternatives for plastic,” Chaiwat said, adding that a unit producing compostable plastic is running at full capacity from less than 50% before.

Bioplastics come from renewable biomass sources like sugarcane, corn or cassava, and are connected to a multidisciplinary field known as synthetic biology, or synbio. Bangchak said it could in time make synbio products such as plant-based meat substitutes and cosmetics, while adding that these projects are in their early stages.

Such industries fall under the sustainability drive pursued by Bangchak, which has a renewable energy business apart from fuel refining and marketing.

Earnings Impact

“Entering the bioplastics business is a great idea as Thailand and the world try to wean themselves off fossil fuels,” said Kannika Siamwalla, an analyst at RHB Securities (Thailand) Pcl. “But we would remain cautious on whether or not it can generate any meaningful contribution to its earnings in the near term.”

Bangchak’s net income slid 80% in the third quarter from a year earlier to 370 million baht ($12.3 million) as an economic slowdown sapped fuel demand.

The shares have tumbled 24% in 2019, compared with a 2.7% advance in the overall Thai stock market.

Chaiwat said in the interview Monday that the bio-based and renewable businesses could eventually make up 60% of earnings before interest, taxes, depreciation and amortization, from about 40% currently.

He expects 20% profit growth in 2020, aided by demand for biodiesel and for cleaner fuel in the shipping industry.

--With assistance from Anuchit Nguyen.

To contact the reporter on this story: Siraphob Thanthong-Knight in Bangkok at rthanthongkn@bloomberg.net

To contact the editors responsible for this story: Sunil Jagtiani at sjagtiani@bloomberg.net, Aaron Clark

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