Chemical Company of Malaysia Berhad Annual Report 2019

Operational Review To meet growing market demand for chlor-alkali products, the Chemicals Division embarked on a capacity expansion exercise in FY 2018. This involved the reactivation of our Pasir Gudang Works 1 or PGW1 chlor-alkali manufacturing facility; the relocation and expansion of a new Calcium Nitrate (CN) plant in Shah Alam; and the expansion of the production capacity at our Coagulant plant by adding a new polyaluminium chloride production line. All these plants that have undergone capacity expansion are already generating revenue which bodes well for the Group’s performance over the short to mid- term. They also underscore the Group’s strategy to increase our market share by increasing the output of our products, especially in the face of growing demand. Initially scheduled to be commissioned in the third quarter of 2019, the PGW1 facility only began its testing and commissioning in December 2019 due to some operational setbacks beyond our control. Following a RM76.5 million investment, the PGW1 facility boasts the latest chlor-alkali manufacturing technology including an energy-saving membrane process which produces high-grade chlor-alkali products in a safer and more environmentally friendly manner. Today, PGW1’s total chlor-alkali capacity has increased to 60,000 ECUs (Electrochemical Units) per annum. It is producing 135,000 tonnes as compared to 90,000 tonnes of liquid caustic soda previously, thereby cementing its position as CCM’s main earnings driver. The Chemicals Division is also implementing various improvement programmes to derive more operational savings at the plant. Given its current extended capacity, the Chemicals Division is well primed to seize exciting chlor-alkali market opportunities locally and regionally. It is also ideally suited to capture growing demand from various domestic industries that are currently importing their chlor-alkali supplies. Meanwhile, the new CN plant which was commissioned in April 2019 and obtained its license in August 2019 began running at higher capacity than the old plant and is producing better quality calcium nitrate for the rubber glove industry. With a production capacity of 22,800 MT/per annum, it is capitalising on the current uptrend in calcium nitrate demand from rubber gloves players. The plant is tapping a specially designed filter system instead of a traditional precipitation process to produce high quality calcium nitrate. This new process by filter press essentially means that, even with a lower capital expenditure (due to a smaller footprint), the plant is now capable of producing higher output per production line. The plant also boasts an improved drying efficiency rate by as much as 20%. To meet the regulatory requirements, we have put in place a more effective affluent treatment system for the plant. Following the Coagulant plant’s integration of an additional polyaluminium chloride or PAC production line in the form of a third glass-lined reactor, production capacity has expanded by 30%. PAC is widely used as the main coagulant (thickening agent) in potable water treatment in Malaysia. With the increased output from the PAC line, our coagulant business is well suited to fulfil the pent- up demand for coagulant from a growing population and demand for treated water. Over the course of FY 2019, the Chemical Division’s Pasir Gudang Chlor Alkali production exceeded name-plate (design) capacity to meet market demand. Our other production facilities namely the Coagulant and Calcium Nitrate plants both have an overall utilisation rate of above 80% at all times. 21 ANNUAL REPORT 2019 BUSINESS OVERVIEW GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION