CCM to close down fertilizer plant in Shah Alam

PETALING JAYA: Chemical Company of Malaysia Bhd (CCM) is shutting down its fertiliser plant in Shah Alam and retrenching 232 staff due to prolonged negative market conditions.
It said that demand for ammonium nitrate (AN) based fertilisers, which the plant manufacturers have reduced over the last five years, are factors that no longer provide conditions conducive for fertiliser manufacturing run by its 50.1%-owned unit CCM Fertilizers Sdn Bhd. The remaining 49.9% equity stake in CCM Fertilizers is directly held by Lembaga Tabung Haji.
“Additionally, market outlook is expected to be bearish with major customers comprising the oil palm plantation houses trending down to cheaper fertilisers such as straights and mixtures as the downtrend in prices of crude palm oil (CPO) is worsened by high CPO inventory level, low crude oil and other commodity prices,” it said.
CCM said the 232 workers that will be made redundant by the closure of the plant will be accorded market driven severance packages.
“We are extremely saddened by this situation and the untenable business proposition left us no choice but to resort to this option. We thank all our staff for their years of service. We will work closely with our outgoing staff to provide counseling and seek placement opportunities,” it said.
The redundancy and asset impairment exercise will cost the company about RM30 million.
CCM said barring any unforeseen circumstances, the closure of the plant is expected to be completed by June 30, 2016.
CCM said there will be no change with respect to the availability of its Cock’s Head Brand (CHB) products as manufacturing of urea based fertiliser will continue at its plants in Lahad Datu, Sabah and Bintulu, Sarawak, which have a joint annual capacity of 260,000 tonnes.
The supply for AN based fertiliser will be fulfilled through outsourcing to a third-party manufacturer.
“We wish to assure our customers and suppliers that despite the closure of the Shah Alam plant, there will be no disruption of supplies in the market. There is adequate stock of CHB products and a transition into third party manufacturing has already commenced. We will continue our trading business and serve all commitments made to our customers,” it said.
The Shah Alam plant, which commenced in 1966 with a capacity of 240,000 tonnes, experienced a pre-tax loss of RM4.3 million in 2014 and the business continued to face challenges in 2015.
“The prolonged depression of CPO prices saw plantation conglomerates and groups switching from compound fertilisers to straights and mixtures which further affected business.
“Compounded by a higher risk in terms of sustainability of its economic profit and the continued weakening of the ringgit, which makes importation of raw materials more expensive, further dampened the viability of the business,” it explained further.