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UKEM Foresees 10% Sales Rise

June 20, 2008

By Vichaya Pitsuwan, Bangkok Post, Thailand

Jun. 19–Union Petrochemical Plc (UKEM) expects its revenue to rise by 10 percent in 2008, driven by the continuing rise in petrochemical product prices in line with surging oil prices and continuing demand.

The company has revised up its revenue projection to 2.7 billion baht from an earlier target of 2.5 billion, according to deputy managing director Perajed Suwannapasr.

The MAI-listed commodity solvents trader said its second-quarter performance had been above expectations and it expects the trend to continue for the rest of the year.

More than 90 percent of its revenues currently come from solvent trading and the remaining 10 percent from specialty chemicals and specialty solvents.

Mr Perajed said that even though oil-price volatility made petrochemical prices unpredictable as well, the company was confident that its good inventory management would keep margins healthy.

Since May, chemical prices have gone up 10-15 percent as a result of surging oil prices that are close to $140 a barrel. Ukem expects to see prices rise another 3-5 percent.

Mr Perajed said export revenue would also increase in the second half of the year as Esso has appointed the company as its specialty solvent distributor in Vietnam. Ukem also will distribute products for PTT Phenol.

PTT Phenol postponed the start of operations from the third quarter due to a gas pipeline leak but this would have limited impact on Ukem, he said.

Ukem hopes to see revenue from PTT Phenol add between 300 million and 400 million baht to its full-year sales in 2008 and Esso another 120 million.

Mr Perajed said the company was also reviewing proposals from potential Chinese and Japanese partners for a new 300-million baht solvents investment.

“We have been traders for twenty years, and the decision to start up a solvents plant should allow us to better control product costs,” said Mr Perajed.

Ukem plans to build a plant to make materials to supply to the coating industry with a capacity of 50,000 tones yearly for the domestic market.

“We need a partner who can help secure raw material supply and offer production technology and, most important, someone who allows us to hold majority shares,” Mr Perajed said.

UKEM shares closed yesterday on the Stock Exchange of Thailand at 3.30 baht, down 22 satang, in trade worth 16.8 million baht.

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