Octal increases capital to reach $1.1bn in exports by 2011

Octal Chairman Sheikh Saad Suhail Bahwan said total sales of polyethylene terephthalate (PET) were $25m in June and would reach $100m per month by the middle of 2011.

Octal ships more than 1,200 containers per month from Oman and now accounts for 85% of import-export traffic through the port of Salalah.

Sheikh Saad said:

"Despite the downturn, our business is growing on the strength of scale, reliability of supply and product quality offered by our advanced manufacturing operation in Salalah Free Zone. In two years we will be a $1bn company. We are winning new customers while the competition cuts back or closes down and making steady progress in converting the market to PET."

Octal, which opened the world's first integrated PET resin and sheet complex in January, exports to more than 60 customers in 33 markets. It has also substituted 90% of PET resin imports into Oman, valued at nearly $42m a year.

June was Octal's busiest month to date, with 22,000 metric tons (m/t) of PET resin and sheet sold to local, regional and international customers.

Eng. Awadh bin Salim Al Shanfari, CEO of Salalah Free Zone, said: "Salalah Free Zone's competitive advantages and its prime location in the West Central Asia region provide a platform for a variety of business and downstream industries. Octal's dramatic growth shows what can be achieved and underlines the fact that Salalah Free Zone is the ideal location from which to expand."

Octal exports 66% of its products to Europe, 30% to North America, and the remainder to Middle East and Asian markets.

Octal produces PET resin for soft drink, water and edible oil packaging, and PET sheet, the world's fastest growing material in clear rigid plastics, which is used for food, dairy and consumer product packaging.

Built at an initial cost of $350m, Octal's integrated PET complex has a production capacity of 330,000 metric tons (m/t). Total PET capacity will increase to 830,000 m/t following the completion of a second phase of expansion in 2011. At that point, Octal will be the world's largest PET producer on one site.

Octal's Sheikh Saad said: "Octal is a growing business and is reinvesting resources in the development of local talent, creating new jobs and training for young Omanis. We are proud that a third of our workforce of more than 350 employees is made up of Omani nationals."

He said: "In 2008, total exports for the year were $48m. After five months of operations at our new complex in Salalah Free Zone, monthly sales are $25m. By 2011, as one of the largest producers worldwide of PET packaging materials, Octal will have annual exports of $1bn."

Octal has already closed on the equity and mezzanine financing it needs to complete phase two of its expansion.

Octal has raised $100m in equity from its existing Oman- and GCC-based investors and aims to secure $130m in additional debt from local and regional banks, maintaining a high ratio of equity to debt (55% versus 45%).

Sheikh Saad said: "Our annual running rate of exports now stands at around $300m and will increase to $400m by December. Despite being a new company, the financial community recognizes our impressive track record and ability to become a world leader in PET based out of Oman."

Since its official launch in 2006, Octal has secured $194m in long-term loans and $68m in working capital loans from Bank Muscat and Bank Dhofar.

Octal has also arranged $32m in mezzanine financing from Bank Muscat, an investor in Octal's parent company. The Middle East and North Africa Fund of HSBC acquired a minor stake in Octal Holding in 2008.

Commenting on Octal's phase two expansion, Bill Urquhart, Senior Vice President of Townsend Solutions, the US-based plastics consultancy and market research firm, said: "Octal's world-scale site, technical advantages, and its ready access to feedstock chemicals save costs and offer unique integration. This is the new model for global competitiveness in PET. Octal's phased development and product seeding are aiding sales growth and delivering a superior quality product."

Octal Petrochemicals is a wholly-owned subsidiary of Octal Holding & Company SAOC, a joint stock company listed on the Muscat Securities Exchange.

Octal's investors include the National Investment Fund Company (NIFCO), Muscat Overseas, Oman Investment Company, Malatan Trading and Contracting, Oman and Emirates Investment Holding, Suhail Bahwan Group, Dhofar International Development and Investment Holding Company (DIDIC), Bank Muscat, and the MENA Infrastructure Fund (HSBC).