GEORGE TOWN: Engineering company Unimech Group Bhd
will undertake about RM15mil worth of expansion projects overseas this year.
Group executive director Y.F. Sim told StarBiz that one of the projects involved ramping up the production of industrial valves in Indonesia.
“We are spending about RM6mil to increase production in Purwakarta, Indonesia.
“The plant will produce valves used in palm oil production. About 20% of the output will go to the palm oil sector.
“The demand for valves from the palm oil sector should remain healthy in 2024,” Sim said.
In 2023, Indonesia introduced a mandatory requirement for 35% palm oil content in biodiesel, up from 30%.
“With the higher mix, known as B35, the total domestic demand for palm oil could increase to 25 tonnes,” Sim said.
However, Indonesian palm oil exports are expected to decrease by about 4% this year to about 29 million tonnes in 2024, according to the Indonesia Palm Oil Association.
“Palm oil exports are expected to fall because of higher domestic demand for vegetable oil as feedstock for biodiesel while production growth remains modest,” Sim said.
The Puwarkarta plant will also produce heating, ventilation, and air-conditioning (HVAC) valves for the general industries.
“We expect Indonesia to spend on expansion projects this year as its gross domestic product (GDP) is expected to rise 5% in 2024.
“Unimech is very well positioned in Indonesia to tap into the growing economy,” Sim said.
The group has over 50 warehouses and distribution centres to supply valves across Indonesia.
In the second half of 2024, the group will establish a warehouse in the Philippines to distribute HVAC valves.
“We plan to leverage on the country’s growing gross domestic product (GDP) that will see an increase in infrastructure spending, driving the expansion of the manufacturing and retail sectors, as well as creating new employment opportunities,” he said.
The Asian Development Bank has forecast that the Philippines’ economy will grow 6% in 2023 and 6.2% in 2024.
Sim believes that the GDP growth in the Philippines will also fuel the demand for industrial valves controlling the flow and pressure of liquids, gases and slurries within a system.
“We are targeting the HVAC segment there, which is needed to regulate the temperature in new factories and commercial buildings,” he said.
He added that Unimech is looking at Manila as a potential site for the group’s new warehouse to distribute its industrial valves.
Sim added that the group would spend another RM4mil to expand its manufacturing operations in Tianjin, China, this year.
According to a market research report, the HVAC valves market is expected to increase to US$6.83bil in 2029 from US$4.7bil in 2022, growing at a 4.6% compounded annual growth rate (CAGR).
“The rapid expansion in the industrial and construction sectors will fuel the demand for HVAC valves.
“The Asia Pacific is experiencing fast growth because of the expanding construction sector and rising awareness for energy efficient ventilation systems,” Sim said.
Moving forward, Sim said the group would continue to focus on the HVAC, oil and gas, marine and shipbuilding, as well as water and wastewater industries.
“We will also continue to improve the effectiveness of our business operations and efficiency of manufacturing processes for cost savings to enhance profitability,” he said.
He added that Unimech will also streamline operations that are not contributing to its profitability.
“We will continue to look for new opportunities to grow our businesses through capital expenditure and investments,” he said.
A report by Mordor Intelligence highlighted that the industrial valves market in Asia-Pacific is estimated to reach over US$19bil by the end of 2023, with a 5.5% CAGR.
The report added that the factors driving the market include increasing demand for valves from water treatment plants and the oil and gas industry.
Meanwhile, Unimech also supplies industrial valves to many palm oil mills in Indonesia.
Sim said contributions from Indonesia are expected to continue to generate the most revenue this year.
Indonesia generated about 26% of the group’s total revenue a year ago.
“Palm oil output in Indonesia in 2023 is likely to rise by 3% to 46 million tonnes if the El Nino weather phenomenon doesn’t disrupt production.
“The biodiesel consumption of palm oil is also expected to rise to 12.5 million tonnes based on the 2023 biodiesel allocation of 13.15 billion litres,” he added.
In the food sector, Sim noted that palm oil consumption in the republic is projected to rise by 100,000 tonnes to 6.9 million tonnes in 2023/2024 due to continued growing demand from households and the food industry.
“We expect the rise in palm oil consumption will help increase the demand for our industrial valves,” he said.
Sim, meanwhile, said the HVAC valve market is also expected to increase to US$6.83bil in 2029 from US$4.7bil in 2022.
He pointed out that rapid expansion in the industrial and construction industry and the growing awareness for energy efficient and air ventilation systems are expected to drive the HVAC segment.
