Although exact locations have not been finalised, Elstar said yesterday that the joint venture would operate in the European Union as well as the Commonwealth of Independent States. "The parties are planning to sign a detailed and binding agreement within 90 days after the agreement on the framework of the cooperation," the company said in a statement.
The move is part of a targeted move by the Malaysian palm oil industry to increase its presence in both the European Union and the Commonwealth of Independent States, as the industry struggles to maintain its world market leading position in the face of stiff competition from Indonesian producers.
Premium Nutrients said that the arrangement with Elstar aims to help it boost its turnover by 10 per cent to approximately RM 56 million (€12m) by 2005 by tapping into the Polish manufacturers existing industrial facilities located in both Poland and the CIS countries.
Premium Nutrients' managing director P.N. Argawal said that the markets that Elstar is present in currently represent huge potential. He added that the initial focus will be on high margin products such as trans fat-free or healthly fats for margarine or speciality fats for the animal feed industry.
Listed on the Warsaw Stock Exchange, Elstar Oils produces refined oils and fats for the food industry. Its primary focus is on the manufacturing of rape seed oil and other vegetable oils and fats to be sold to the food and non-food sectors. Elstar's current manufacturing capacity is around 60,000 tons per annum.
Premium's chairman Tan Sri Dr K.R. Somasundram said that the joint venture was likely to be carried out in three phases, with phase one being purely marketing, followed by manufacturing in phase two and the setting up of an independent manufacturing plant in the final phase.
"Our plans to go into manufacturing would be a gradual process as it means setting up facilities in Poland. At this point, we have identified a port to set up a terminal, which will facilitate imports and handling of lauric (palm kernel oil and coconut oil) and palmatic products, over the course of time," he said when the investment was first announced at the end of last month.
Speaking to CEE-foodindustry.com back in June this year, Zainuddin Hassan regional manager for the Malaysian Palm Oil Promotion Council in Europe said, "Central and Eastern Europe has been the main focus for our marketing drive in Europe recently. In this region there is growing demand for both shortening agents and fats for the bakery and confectionery industries, which in turn is fuelling demand for palm oil. Driving the growth are markets such as Bulgaria, the Czech Republic and, in particular, the Ukraine."
Judging by Hassan's comments and Premium's recent investment, it seems that future investment by Malaysian oil manufacturers in the region is inevitable.