The experience of a major Thai manufacturer suggests that seeking alternative fuels to avoid high oil costs is making companies sexier in the eyes of investors.

Diamond Roofing Tiles (DRT), the country's third-largest producer of fibre-cement roofing tiles and siding boards, has embarked on the conversion of its Saraburi plant from diesel to natural gas.

The company spent Bt6.6 million on a pipeline delivering natural gas to its 8th production line in November last year and a short one month later, it saw a 50 per cent reduction in its fuel cost at those lines.

"We can reach break-even point within one year," declares vice president Satid Sudbuntad.

He says DRT must further assess the outcome of using natural gas, and how much the move is helping to save energy costs. However, DRT plans to extend the natural gas line to its remaining seven production lines.

"Extending the pipelines to the other production lines will not cost as much as the previous investment," Satid says, pointing out that all the production lines are located on the same 23.5-hectare site in Saraburi.

DRT's decision to convert to natural gas was warmly welcomed by stock analysts. They said in research papers that if DRT adopts natural gas for all its production lines, it will help the company reduce its expenditure by Bt10 million to Bt12 million per year.

Satid says fuel costs are not the company's only concern. It is also worried about the costs of logistics and raw materials.

He predicts that in another few years, logistics costs will have a significant impact on the company's operations. Before the recent rise in oil prices, the company's logistics costs were only 5 per cent of total costs, but since then, they have risen. Although it has passed the costs of transport on to customers as much as possible, it cannot afford to do this in some very competitive areas, such as the southern provinces. In these places, there is a need to cut prices, rather than increase them.

DRT has resolved the problem by changing from land to sea transport for its products headed to southern provinces. It loads products at Bang Pa-in port to ship them south.

"The shipment cost is lower than truck transport, but it requires a large volume of product per shipment," Satid says.

About 80 per cent of DRT's total sales come from fibre-cement roofing tiles and siding board. Asbestos and cement combine to make up 74 per cent of its total raw materials.

Satid says DRT is not very worried about raw material costs because imported asbestos is costing less because of the strength of the baht against the US dollar. At the same time, cement remains under government price controls.

In terms of marketing strategy, he says the company is trying to break into export markets in Laos, Burma, Cambodia, Taiwan, China, Japan, Indonesia and Korea.

DRT has 600 dealers throughout Thailand, and is selling directly to property project developers.

Last year, it signed a deal with Power Line Engineering to supply roofing tiles and siding boards to an Au Athorn housing project and this year it expects to sign another two Au Athorn deals.

Over the last nine months of 2006, DRT recorded revenue of Bt1.79 billion, up 17 per cent from the same period in 2005.

Satid says the company is aiming for 10 per cent sales growth this year.

Sasithorn Ongdee

The Nation