Malaysian biofuel firm gets boost from vitamins

Bryan See, product specialist, shows a bottle of crude palm oil (R) and biodiesel at a plant in Ipoh, about 200 km (124 miles) north of Kuala Lumpur January 11, 2008.

KUALA LUMPUR (Reuters) - Malaysian biodiesel firm Carotech Berhad CTEH.KL relies on a booster dose to stay alive and it is called vitamin E.

The company thrives on sales of vitamin E, or tocotrienol, which is extracted from crude palm oil in a process where biodiesel or methyl-ester is a by-product.

It owns one of the few biodiesel plants that runs at full capacity in Asia where the industry is crippled by surging palm prices, with over a dozen biofuel projects delayed and others running at a fraction of total capacity.

"With the high CPO prices, all biodiesel companies are having a cold but we are not suffering as much because tocotrienol helps to subsidize some of the losses that are occurring in the market," David Ho, Managing Director of Carotech on Monday, told Reuters in a telephone interview.

He was speaking at the Reuters Global Agriculture and Biofuels Summit.

Commonly used in dietary supplements, personal care items and medical products, palm-based vitamin E is a premium nutrient gaining much interest from health-conscious markets like the United States, Japan and the European Union.

Ho says Carotech's 50-percent blend of vitamin E is currently valued at $600 per kilogram. In contrast, a tonne of biodiesel is now worth $1,100.

One tonne of crude palm oil, currently trading at $1,050 in the physical market, is needed to produce both the products.

Strong sales of the palm-based vitamin enabled the firm to build a 90,000 tonne per-year biodiesel plant in the northern Malaysian state of Perak, Ho said.

The first phase of the plant is operational and is producing 40,000 tonnes.

Carotech, which currently runs another plant in Perak with a production capacity of 32,000, will see its production increase to 122,000 tonnes by March 2008, Ho said.

VITAMIN E BOOST?

With vitamin E sales accounting for nearly 25 percent of the firm's revenue in the financial year ended June 2007, Ho said the company would embark on marketing campaigns and research to push revenues by double-digits this year.

"Palm-based vitamin E is still a new product but through our marketing campaigns and research into the application of this nutrient in healthcare this should change," Ho said.

"We may see an increase especially in the markets we are already in such as America, the Europe Union and Japan," he added.

But Ho said it was difficult to gauge the extent by which vitamin E sales could act as a buffer against weaker biodiesel shipments, which were dented by surging palm oil prices, which hit a record high of 3,420 ringgit ($1,050) in the futures market on Monday.

Palm oil, up more than 10 percent this year following a 53 percent jump in 2007, is fuelled by a heady blend of booming Asian food demand, lower output in Malaysia due to floods and surging crude and vegetable oil markets.

"Vitamin E will keep us profitable but we may not be as profitable as last year because producing costs will naturally go up," he said. "I think it (profits) will be 30 percent gone."

The company, which has a market value of 234.9 million ringgit, posted a net profit of 17.5 million ringgit in the last financial year ended June 2007.

The irony, Ho says, is that palm-oil prices have surged due to biodiesel prospects.

"The reason for such a bullish price is the argument that there will be more demand for CPO because of the biofuel requirements, but at these prices nobody can produce biofuel and make a profit," Ho said. "Hopefully vitamin E helps."

(For summit blog: summitnotebook.reuters.com/)

(For more on the Reuters Global Agriculture and Biofuel Summit, see <ID:nSP132831>)

(Editing by Michael Urquhart)