“We do expect competition from incumbent Russian players”
Leong Choong Chee about the next step by the Far East sugar factory’s project
The company from Thailand Sutech Engineering Co. announced plans to create in Khabarovsk territory the manufacture of refined and standard sugar. The subsidiary company which will act as the project operator is registered in Russia. What further steps will be taken by investor for the construction of a sugar factory, says Executive Vice President Leong Choong Chee.
– How is the registration in Russia, did you receive documents from the tax service about registration of the subsidiary company?
– Yes, we have received endorsement from the Russian Tax Authorities for the company registration.
– What is the name given to subsidiary company?
– Far East Plant for Sugar and Derivatives, LLC.
– How many rubles will amount to its share capital?
– Presently, the share capital is Ruble 100,000 only. When all relevant approvals are obtained, we shall increase to 30% of the total investment project value.
– And who will become major shareholders and top managers?
– The ultimate owners will eventually be 3 parties from ASEAN for 80-90% and balance by one or two parties from Russia. The names of the investors will be announced in due course.
The company has just been formed. It is too early to appoint or hire top management staff which will be done in due course.
– What are the next steps should be for the project’s realizing?
– We are in the process of submitting to the Local Authorities our application for “Priority Large Project” Status, and for admission to the Advanced Special Economic Zone in Sovetskaya Gavan Port area. At the same time, we are awaiting approval from the Federal Authorities for our request for importation for raw materials.
– When your company plans to start design works and construction works?
– The preliminary plant design has already been completed. It will go through further fine-tuning in the months ahead before work orders are issued out to relevant service contractors and equipment suppliers. Assuming all regulatory approvals as mentioned above are obtained, we expect construction ground breaking at the Sovetskaya Gavan Port site in 2nd Quarter 2017. The construction will take about 24 months to complete.
– Previously it was announced that the factory requires 6 to 7 hectares. Is it correct?
– We felt that the previous site offered, although just adequate, was not exactly suitable for our long term plans. After several months of collaborative efforts by the Local Authorities and ourselves, we have identified a more suitable location a short distance from the earlier one. It encompasses an area of about 48 hectares, while still within the Advanced Special Economic Zone in Sovetskaya Gavan Port area.
– How much should be the total investment?
– The total investment for the sugar plant is US$210 million comprising US$150 million for capital expenditure and US$60 million working capital.
– At the preliminary stage stating that the factory will produce the high quality refined sugar 100,000 tons/annum, standard white sugar 350,000 tons/annum and high quality brown sugar 50,000 tons/annum.
– The plans remain same. However, as discussed above, we are awaiting approvals from relevant authorities. Should there be any restrictions to our sugar products supply for domestic market, we may amend production plans accordingly. Further, we are developing plans for value-added sugar downstream products. These plans will be announced in due course as later phases of our investment. The final decision may have some impact on the current production output mix plans.
– Does the raw materials for the sugar refinery will come mostly from Asia and Australia?
– That is correct.
– Has the company studied the market of the Far East and Russia?
– Yes, we have carried out preliminary evaluation of the Russian Far East sugar market. As part of the continuing efforts for more accurate data, we will be engaging specialist consultants to carry out more detailed studies. In fact, the data gathering of sugar market is an on-going process, a standard operating procedure for the plant. We have to ensure that we have up to date information for more appropriate business strategies when we go to market.
– Where you will be supplied sugar products, in what amounts?
– The Russian Far East sugar demand is estimated at about 250,000 metric tons per annum. We are ready to supply this quantity. However, we awaiting Authorities’ approval or a lower volume restriction will be imposed.
– Your sugar from Soviet Gavan region also will be supplied to China, isn’t it?
– Yes, we plan to export sugar products to neighboring countries including China. Market study is still being carried out.
– Your products enter into competition with the local company “Primorsky sugar”. How do you intend to win?
– We do expect competition from incumbent players. We are confident of establishing a respectable foothold in the market with our production efficiency through the use of latest technology in sugar production, logistical supply, and sales and marketing distribution strategies.
– What pricing policy will be set by your company?
– We trust you will appreciate that product pricing is a sensitive matter hence will only be revealed as we approach ready-to-market phase. Ultimately, any pricing strategy must be grounded on market realities taking into account buyers sensitivity for product quality, efficient distribution and quick response to competitors’ actions.