Page 25 - CPC 2018 Annual Report

DOWNSTREAM OPERATIONS 23
OTHER PRODUCTS
CPC IN LPG: MASTERING THE MARKET AND FORGING EXCELLENCE IN DISTRIBUTION
CPC’s long-standing monopoly in the LPG market was broken when the government opened it up to competition in 1999. Formosa Petrochemical Corp. came in as a producer and independent traders began importing their own supplies. As both a state- owned enterprise and one of the market’s main suppliers, CPC is charged with maximizing its operating performance while at the same time ensuring sufficiency of supply to the domestic market. With household gas, CPC’s LPG Business Division has been able to maintain its leading market share by making full use of its quality advantages and also fully utilizing the company's north-south transport and storage systems and comprehensive marketing and retail network. In selling industrial gas, the company aims at lifting the quality of its customer service so as to both retain existing customers and win new ones. On the downside, CPC has to balance compliance with the government’s LPG safety reserve policy against optimizing the rate of turnover in its storage tanks, which is crucial to profitability; and at the same time it must endeavor to reinforce both occupational safety and environmental protection protocols. And along with those preoccupations the company must be a good corporate citizen and be seen to fulfill its CSR commitments, an obligation not shared by all of the players in the market.
SOLVENTS & CHEMICALS CPC TAKES AN INNOVATIVE APPROACH TO AN ESTABLISHED MARKET
CPC holds a dominant market share position in Taiwan’s solvents and chemicals sector: around 80% in solvents, 35% in toluene, 45% in xylene, 60% in methanol, 50% in asphalt and 45% in sulfur.
CPC’s Solvents & Chemicals Business Division aims to achieve its operating objectives in a number of ways. This initially involves taking a vigorous approach to efficient customer service as well as expanding exports to promising markets such as China, Vietnam, ASEAN and other Asia Pacific countries – which is in line with the government's New Southbound Policy. There is also much effort going into enhancing product quality and image, continuous improvement of the refining process and lowering production costs. Most important of all, they are developing both new and innovative products and new areas of business.
CPC LUBRICANTS: MARKET LEADER AT HOME, EXPANDING IN ASIA-PACIFIC
CPC is the leader in Taiwan's automobile lubricants market with its duo of brands ‘CPC’ and ‘Mirage’ appealing to both consumer and professional users-apositionsupportedbystrong,well-definedand diversified sales channels. Those include more than 30 contracted distributors, the 600-plus CPC directly-operated gas stations and many retail chain stores. CPC's Lubricants Business Division (LBD), founded in 1999, systematically integrates production, logistics, marketing, technical capacity and other resources to construct a
uniquely competitive profile; and is committed to providing quality products, premium services and full technical support to meet the needs of its community and corporate customers.
The LBD has established an automated precision blending system in Chiayi that took more than three years from the start in 2011 to construct - at a cost of NT$400 million - and which is unique in Taiwan. This plant has sharply lifted the level of efficiency and accuracy in lubricants production, which runs at an annual output of up to 90,000 kiloliters. After the installation of lubricating grease production machinery with an annual output of more than 3,300 tons as part of the renovation project, CPC’s lubricant production equipment and technology is second to none, not only in Taiwan but also in the wider Asia-Pacific region. All production is carried out in strict accordance with CPC-researched formulas and rigorous and reliable inspection, backed by a strong sales team – evidencing CPC’s dedication to creating a gold-standard brand.
In addition, CPC's LBD has set up a highly efficient logistics network, based on four warehouses for finished products in northern, central and southern Taiwan, which works as a distinct competitive advantage in making sales. In current developments, CPC has as of early 2018 embarked on the two-phase construction of bonded storage and blending facilities for base oils and additives at Taichung Port to strengthen its supply capacity and enable international trading in lubricant materials and customized products.
In addition to cultivating its domestic market, the LBD is also vigorously expanding in the Asia-Pacific region. Distributorships, direct customer shipments and agencies are currently operational in China, the Philippines, Indonesia, Vietnam, Myanmar, Cambodia, India and other locations. CPC’s future focus with regard to expansion into overseas territories will be on developing diversified international trade in lubricant materials and on external OEM manufacturing. An example of the latter approach, designed to circumvent the ASEAN tariff barrier to non-members, is the recently-formed Maxihub Corporation joint-venture located in Vietnam's Tong-Nai province. Formed by CPC along with Taiwanese and local firms with specialist know-how, this company will operate a lubricants blending, storage, packaging and logistics complex producing both CPC-branded and OEM products for distribution across ASEAN markets. Commercial operation is scheduled to begin in 2019 and when full production is reached it will become the LBD's second-ranked manufacturing base.
CPC's LBD will continue to uphold its core competences in manufacturing and marketing lubricants – skills such as R&D, formulation and blending, logistics, quality control and technical support services – while focusing on developing innovative premium products, technical consultancy and customer satisfaction. Looking to the future, the LBD's vision encompasses maintaining its lead over the competition in the home market while significantly expanding its presence in Asia- Pacific and other overseas markets to make the lubricant brands 'CPC' and 'Mirage' become well-known worldwide.