Sales situation offsets Tasco's project gains
Sanctions take a toll on firm's oil imports
Tipco Asphalt (Tasco), Thailand's biggest asphalt producer, expects sales in 2021 to drop by 28% to 1.25 million tonnes from 1.75 million last year as a result of a need to adjust its sales channel, despite more infrastructure projects.
The change results from trade sanctions imposed by the US on Venezuela, restricting its export of heavy crude oil, a raw material for asphalt manufacture.
The trade restriction was made during Donald Trump's administration on Venezuela, following political problems in the South American country.
Tasco's crude oil inventory can last until the middle of this year. The firm needs to start finding new suppliers in other countries in South America and Asia, said Chaiwat Srivalwat, Tasco managing director.
"Crude oil from other suppliers will be sold at US$60 per barrel, higher than the $40 sold by Venezuela, so we have to change our business plan," he said.
Tasco usually produces and sells its asphalt, along with asphalt bought from oil refineries across Asia. Sales are also made in part through trading companies.
Under the new marketing plan, Tasco will sell products directly to customers in order to reduce unnecessary costs by cutting out middlemen, but this can be only done in countries where its oil refinery facilities are located.
Tasco operates oil refineries that produce asphalt in China, Indonesia, Thailand and neighbouring countries.
"These countries will resume projects this year to build new roads and carry out road maintenance after the impact of lockdown measures on transport last year," said Mr Chaiwat.
The new marketing plan will result in a drop in sales, but Tasco expects to have a higher profit margin, he said.
Mr Chaiwat said he believes the Thai market will have sustainable growth as the government has continued to disburse budget to infrastructure projects since late December last year. He expects spending will peak in the first half of this year.
Last year, Tasco acquired more shares in Thai Slurry Seal for 373 million baht, increasing its ownership from 25% to 62.5%. It hopes to benefit from value-added products and technology used by Thai Slurry Seal. Thai Slurry Seal was awarded a 5-billion-baht contract for the third runway development project at Suvarnabhumi airport.