May 4, 2018
Volume 7 Issue 8
ExxonMobil Buying Indonesian Blender
The $435 million acquisition includes the Federal Oil brand of lubricants and a new blending plant in Cilegon, Indonesia. ExxonMobil said Sunday that the plant has capacity to make 100,000 metric tons per year of lubricants, while FKT listed it last year at 90,000 t/y. ExxonMobil will acquire 100 percent of FKT from its parent company, PT Mitra Pinasthika Mustika Tbk (MPM).
The American energy giant expects to complete the transaction by the third quarter of 2018, pending shareholder and government approvals.
ExxonMobil officials said the acquisition should speed the company’s growth in Indonesia, said by analysts to be the world’s ninth- or 10th-largest lubricant market, with annual demand of roughly 800,000 t/y. Last year Kline & Co. consultants forecasted that the nation’s lube market will grow an average of 2.5 percent annually through 2026.
“This is the first time ExxonMobil has purchased a lubricant blender in Indonesia,” Erwin Maryoto, vice president of public and government affairs for ExxonMobil Indonesia, told Lube Report.
“Driven by strong economic development and an expanding middle class, Asia is expected to represent 70 percent of global lubricant demand growth over the next decade,” said Nigel Searle, senior vice president of ExxonMobil Lubricants, in the company’s April 29 press release.
MPM, a distributor for motor vehicles, told Lube Report Asia “the transaction was worth U.S. $436 million, and we have filed this to the Jakarta stock exchange.” Proceeds of the transaction will be reinvested into expanding its existing portfolio of businesses to capture previously untapped growth.
After the acquisition, MPM will continue to distribute FKT products through its network of about 40 dealers, 3,200 Federal Oil Centers and more than 10,000 retailers, which are concentrated on Java Island.
“FKT is one of the key lubricant players in Indonesia, especially [for] motorcycles,” said Ilman Hizbullah Hasibuan, consulting manager of Ipsos Business Consulting Indonesia. “Meaning that ExxonMobil will be able to access Federal’s market through this purchase and increase their presence among Indonesian lubricant users.
“Furthermore, having a local blending plant means they can blend ExxonMobil lubricants through Federal’s plant to be marketed in Indonesia, and making it easier to acquire SNI [certification] without having to build a blender from scratch,” he added. Indonesia, is preparing to adopt an Indonesian National Standard (SNI) for lubricants. Some observers say part of its purpose is to restrict lubricant imports to the country.
SNI, or the Indonesian National Standard, is a series of lubricant standards required for approval to market lubricants in the country. The Indonesian government recently announced the implementation of SNI in June pending approval from the World Trade Organization.
In recent years, major lubricant blenders like Shell and local state-owned Pertamina Lubricants have expanded their industrial lubricant market portfolio. “Industrial segment for lubricants looks promising in Indonesia. Manufacturing industry are growing healthy, albeit below national GDP growth, and new industrial areas are opening in various places,” said Ilman.
Last month, the Indonesian president officially launched a Roadmap for the implementation of “Making Indonesia 4.0”, aiming to become a top 10 economy in the world in 2030 by focusing on five main industries; food and beverages, textiles, automotive, electronics and chemicals.
“Furthermore, infrastructure development is booming which translate to more demand for heavy machinery and truck lubricants and mining industry is also growing, after a period of decline started in 2012,” he added.
According to BKPM, the Investment Coordinating Board, total investments increased 11.8 percent or Rp 185.3 trillion (U.S. $13 bn) in the first quarter this year.
In reply to which industrial sector ExxonMobil will be focusing on, “The acquisition, combined with our premium Mobil brand, will strengthen ExxonMobil’s lubricant business in one of the fastest-growing markets in the region ….. We continuously evaluate opportunities in all sectors for future investment and growth,” said Erwin.
The acquisition will give Exxonmobil a head-start. “Imported industrial lubricants used to flood Indonesia market, however with SNI implementation it will be limited, which of course would benefit brands that have local blending plant,” said Ilman.