Growing with the nature
The remarkable low carbon footprint of Forchem and its products is well in the line and above with national and international environmental goals. By supporting the green values, we consider bringing major added value to our customers and partners. Forchem’s high R&D standard enables the increase of quality of the product and the decrease of carbon footprint.
Crude Tall Oil is a scarce and valuable renewable product that is intentionally produced from soap in the kraft pulping process of paper and pulp production. Crude Tall Oil is upgraded by the pine chemical industry into a wide range of products used in every day. In Rauma, Forchem Oyj has one of the largest biorefineries in the world. The location of fractionation plant is excellent in regards to Northern raw material resource distribution. Forchem’s location has been carefully considered in term of logistics. The biorefinery is in close vicinity to Rauma harbor. Daily and widely covered connections of the harbor enable flexible and fast deliveries both by sea and by road to all main market areas.
The crash of Crude Oil price is affected by CTO price and by supply agreements, which are linked with energy price. Downward trend is expected to remain during 2016 with no rapid changes in short term. EU directive determining the classification of CTO use for renewable fuels has been finalized. The directive confirms current classification in Finland and Sweden, directing CTO into renewable transport fuels. This may impact the availability of CTO in the long term, putting pressure on the CTO price to increase in the future. The demand for Forchem’ s products continues to be robust. Company sustains the business development by innovations, new products, and co-operation in sales and sourcing. The turnover is expected to decrease by circa 10 %, due to falling market prices in products and CTO. Relative profitability as EBITDA is expected to remain, or decrease slightly.
Risks and uncertainties
Company’s business environment is significantly affected by the development of the global economy. Key indicators are price of mineral oil, dollar/euro exchange rate, price development of substitute Gum Rosins and vegetable oils.
The raw material used by the company, CTO, is sourced from the forest (pulp) industry, which is under the pressure to develop new sources of income from side products, and residual biomass from logging. The recent classifications and changes in tax treatment may affect the pricing and availability of raw material if the use of CTO in biofuels increases drastically.
The bond that Forchem issued in 2015 includes covenants that may lead into premature amortization of loans if breached. The covenants are related to the ratio of interest-bearing liabilities to EBITDA (earnings before interests, taxes, depreciation and amortization) and interest cover ratio.
Concerning certain product groups, dependence on single customers has been increased. This naturally increases the business risk because losing a key customer may lead to decrease in sales and profitability.