Executive Talk
Interview with the Owners of
P.S.P. Specialties Public Company Limited
Mr. Sakesan Krongphanich
Deputy Chief Executive Officer
Could you start by sharing the history of P.S.P. Specialties (PSP)?
Our company was founded in 1989 as a trading company focusing on rubber processed oil and transformer oil. Over the decades the P.S.P. Specialties has grown significantly as today we hold the number one position in Thailand for rubber processed oil, with a 45% market share, and transformer oil, with a 68% market share. Our expertise extends to blending lubricants as well which revenue portfolio from this business is major proportion currently. For rubber processed oil, which is a key component in tire manufacturing, we supply major brands like Michelin, Bridgestone, Yokohama, and Goodyear, both domestically and internationally. Approximately 85% of our production is sold within Thailand, and 15% is exported.
Can you elaborate further on the business structure?
Our core businesses, related service business and new ventures are all complementary to the group and its customers. Firstly, the core business, we are the leading one stop solution provider of lubricant and oil related products with the highest total production capacity and offer a variety of products. For the lubricant, we have a production capacity of 212 million litres p.a., grease at 27,000 tonnes p.a., rubber process oil, 44 million litres/year, and transformer oil of 25 million litres/year. In the lubricant market we have 24% market share, in rubber process oil 45% and in transformer oil 68%. In addition to the production and manufacturing, PSP has a trading business in Base Oil, Additives and Speciality Products, and we are one of the largest traders/importers for Base Oil in Thailand from Singapore and South Korea, and a sole distributor for globally recognised specialty products.
As we further understood the needs of our customers, we expanded with a fuel and asphalt distribution centre of 3.6 billion litres/year, logistics solutions, distribution centres and e-commerce platform.
Through the combination of products, trading, and services solutions we have a diversified business that can service our customers throughout the energy, automotive, industrial, utilities and trading industries.
Can you elaborate on your transformer oil business?
Transformer oil is crucial for cooling transformers to prevent overheating and explosions. We supply 68% of the market, serving every major transformer manufacturer in Thailand, including QTC, Ekarat, and TRT. Our transformer oil is also approved by EGAT, ensuring high standards and reliability.
What about your trading business?
In our trading business, we have invested significantly in infrastructure, including acquiring land and building a storage facilities for base oil and additive. We receive raw materials through our international jetty, with base oil being a key component, constituting 90% of lubricant formulations. We source base oil from both local refineries and international suppliers in Korea and Singapore, ensuring a mix of standard and high-quality base oils.
How do you handle inventory and pricing?
We manage our inventory meticulously, ensuring we do not hold stock longer than 45 days to avoid significant price fluctuations. Our pricing is adjusted weekly based on ICIS indicators, allowing us to maintain stable margins. Although there is a correlation between base oil prices and crude oil, it's not perfect, and we have strategies to mitigate risks associated with price volatility. Over the history of the company our margins have remained within a +/- 1.5% spread from 11-12%, resulted our strong and stable growth of financial performance during last 10 years.
Can you discuss your recent expansions and future plans?
We've expanded our capacity and improved automation to enhance efficiency. Our current capacity is over 200 million litres per year, significantly higher than our competitors. Looking forward, we aim to increase our export market presence to become the largest player in the region. We've built a customer base in 30 countries, with export volumes growing at a 20% CAGR p.a.. We also plan to focus on M&A and new product developments, including food-grade lubricants and AdBlue, which aligns with Euro 5 and Euro 6 standards.
How are you addressing sustainability and environmental concerns?
Sustainability is a core part of our strategy. We're exploring projects to recycle and refine used lubricants, which would improve our margins and benefit the environment. This involves significant investment, collaboration with collectors and regulatory bodies to ensure proper handling of waste oil.
Could you tell us about your joint ventures and investments?
We have a joint venture with Boonrawd’s subsidiary and partner to sell automotive and industrial lubricant and food-grade lubricants and several other investments in logistics and terminals. Additionally, we are involved in the pharmaceutical sector through a 50:50 joint venture with AA Pacific. We’re also looking at opportunities in digital transformation and health and medical sectors, aiming for diversification and growth through our subsidiary, PSP Venture.
What impact do you foresee from the rise of electric vehicles (EVs)?
While EVs are growing, they still require lubricants for various components like grease, gear oil, battery cooling and brake fluid which PSP currently serve the market. Moreover, the increasing demand for transformers for charging stations will boost our transformer oil business. Therefore, we expect our core business to remain strong and continue expanding, particularly in exports.
Finally, what are the key pillars of your business strategy moving forward?
Our strategy rests on four pillars: core business growth in lubricants, expansion in logistics related to our core business, sustainability initiatives like recycling and circular economy, and strategic investments in non-core areas. By connecting the dots between these areas, inspired by Steve Jobs' philosophy, we aim to innovate and grow sustainably.