Lake Asphalt eyes new markets, to launch new products
By Sasha Harrinanan (Newsday)
Plans to partially divest Trinidad Lake Asphalt (TLA), announced in the 2016 - 2017 budget, may no longer be necessary, following management’s “proactive” efforts to increase production capacity and efficiency, launch new products and enter new markets.
Business Day found out about the State company’s plans during an interview with TLA’s Acting CEO, Nigel Minors.
“We have actually been proactive about increasing revenue because we realised that you cannot continue to do the same old thing every year without falling behind.
“So in late September 2015, we signed an MOU with the University of the West Indies; Department of Chemistry, Faculty of Science and Technology, to develop more downstream products. We want to enhance our Lasco range of products; we currently sell Underbody Coat, Bituminous Black Paint, Pipe Guard and Sealant.”
Seated in his office at TLA on the LABIDCO Industrial Estate (LABIDCO), La Brea, Minors said they began by looking at formulations for four new products and have since chosen to further develop two of those.
“Our aim is to commercialise these two within the next six to nine months, pending approval from our line ministry, Ministry of Energy (MoE); and corporation sole, Ministry of Finance (MoF).”
A change in administration usually means a review of projects and agreements. This MOU was no exception.
Although the original MOU is now null and void, Minors told Business Day that TLA intends to sign a new one as soon as the MoE and MoF give their approval. “I suspect that could be within the next three to four months, following which we would launch the new Lasco products. They are expected to generate foreign exchange, US dollars, from sales on the global market.”
Increasing TLA’s production capacity and efficiency requires a new plant, something which also requires final approval from the two ministries.
In the meantime, the company is seeking to improve operations at its existing facility.
“Our plant is more than 67 years old, the process is antiquated as well. So we are in the middle, right now, of some highly sensitive talks - testing and so on, to improve the process. (Subsequently) bringing on a new plant in the same area would likely triple or quadruple our capacity.”
This would be very significant because TLA “would no longer be stymied by a limited production figure” when determining how to meet supply demands.
“Ideally, we would love to have the new plant operational within nine to 12 months, once we get the approval to proceed.”
The impact of production limitations is something TLA experienced within the past six years.
Minors said Chinese companies accounted for “the largest percentage of our distributorship”, particularly in the lead up to the 2008 Beijing Olympics.
“We moved about 32,000 tonnes of our TLA product right before the Beijing Olympics. By 2010, we were moving about 22,000 tonnes. Based on these types of arrangements, there’s where we find the ebb and flow in TLA exports/sales. Hence the need to always be looking at other markets.”
While the slowdown in the global economy affected sales to a certain extent, TLA was also the same time “behind the ball on orders from our other customers.”
Minors explained that because of the 2008, 2009 arrangement, “we had a new player that came into the picture - China Railway, and the previous board decided to focus on China Railway because it was expected to order 50,000 tonnes a year; our production capacity was about 50,000 a year.”
“A lot of the emphasis therefore went towards looking at supplying China Railway from 2011 to 2012 but they ended up ordering an average of 20,000 tonnes per year in the first two years.”
“Lake Asphalt, traditionally, has been a demand-driven production company. We needed to have secured our other markets and even new markets during this time.”
TLA did still supply smaller orders but Minors said not having maintained existing markets or targeting new ones “kept us back a bit from where I believe we should have been in 2012, 2013 in terms of more orders from our long-standing clients’ newer markets.”
“If we had done the ground work,” he added, “when we had that sharp decline in orders from China Railway, we would’ve been able to ramp up orders in other markets.”
Ensuring that TLA never finds itself in a similar situation again is a main driver of the proposed upgrades, which Minors reiterated requires final approval from the MoE and MoF.
Asked about the budget for the new plant, Minors said he couldn’t share that because discussions are still in proposal stage.
However, he did reveal that employees who work in the existing facility would be re-trained to operate the newer equipment.
TLA also intends to “find new roles, as needed, for those whose jobs may be made redundant because the process would no longer be as labour-intensive.”
Currently, TLA employs just over 200 persons, plus about 50 casual workers.
About 75 percent to 80 percent of staff comes from La Brea, Point Fortin, Rousillac and parts of Oropouche.
TLA is “a US $100 million company, on average, per year (but) a lot of that revenue goes into labour costs; its labour-intensive, and other expenses.”
Hence the push by Minors and his management team to execute the aforementioned upgrades.
This, he noted, is expected to increase TLA’s foreign exchange earnings per year.
You can see part if the port at LABIDCO from the CEO’s office.
When the matter of transportation costs arose during the interview, Minors expressed hope that LABIDCO would have its upgrade plans approved too, so that TLA could export its products “down the hill” rather than paying about TT $3,000 per container, round-trip, to either the Point Lisas or the Port-of-Spain port.
“LABIDCO plans to expand the port and its facilities this year to include containerised cargo via the addition of gantry cranes. This would be great for us because our transport costs are a significant part of our expenses - a 20-foot container usually hold 20 tonnes of our product.”
“If we decide to move, on average, 1,000 tonnes per week, that’s 44 containers by about TT $3,000 per container roundtrip, it’s a lot.”
Minors estimated the company would achieve a 75 percent savings if it could use LABIDCO instead.
Regarding doing business in La Brea, Minors, like most others Business Day spoke to, called for the opening of a bank “or at least two ATMs.”
“La Brea also needs a couple of good restaurants, especially when people come down from Port-of- Spain for all-day meetings.”
“We normally cater food but sometimes you want to take clients out and it would be nice to take them somewhere in the area rather than driving to Point Fortin,” Minors stated.