Declaring that it sees encouraging signs of recovery from the COVID-19 pandemic, India-based Maximus International Ltd. say it plans to expand its production capacity in Africa, both through new plant construction and investment in existing facilities.
In a recent interview with Lube Report, officials said the company wants to break ground on a new factory in East Africa perhaps by the end of next year and later to expand existing plants in the region.
Maximus also plans to develop a trading hub in India and to branch into non-lubricant businesses there.
The company is headquartered in Vadodara, Gujarat state. Like many others in many industries, Chairman and Managing Director Deepak Raval said, it felt the impact of the pandemic, but he added that Maximus got by by making adjustments in its supply chain strategy, though he declined to elaborate. The pandemic “did not affect us very badly,” he said.
Now officials believe the worst is past and are encouraged by data on job creations and other signs that economies are rebounding. They expect demand growth for both industrial and automotive lubes. The company’s product portfolio includes automotive lubricants, metal working fluids, textile oils and electrical fluids, and it is planning to add products for electric vehicles.
Chief Financial Officer Milind Joshi said Maximus is also looking to diversify its trading business in India to include furnace oil, ancillary automotive products such as tires and glues, as well as products targeted toward fertilizer and farming equipment.
Officials plan to set up a trading hub in India by the end of October with a full-fledged team to handle the trading of base oils, lubricants and other products, he added.
To manage the impact of current high crude oil prices, Maximus is sticking to its optimum inventory maintenance strategy, Raval said. He added the company’s supply chain management, credit management setup, strong customer relations and control over expenses are also aiding in protecting its margins.
Contract Stability
Joshi said the group is seeing stability in the contracts, which it is getting from the customers. The company’s United Arab Emirates-based subsidiary, Maximus Global FZE, recently secured a long-term contract to supply around 5 million liters of bulk white oils and base oils to one of its large customers, namely Neo Lubritech FZ-LLC.
“Looking at our product quality and the performance and the market acceptance of our products, they have given us the long-term purchase contract for three years,” Joshi said, adding the contract value is around Rs 550 million (U.S. $7 million).
Maximus is also at the final stage of negotiations with one of its customers in Kenya for a similar type of agreement, he added.
Talking about the credit period offered to the customers, Joshi said the company gives around 90 days to its established long-term customers in the UAE. However, customers in Kenya are given around 60 to 75 days as Maximus is a little conservative there due to credit risk and other economic factors, while products are sold on cash and carry terms to new customers, he added.
Joshi noted that Maximus is confident of achieving last fiscal year’s revenue growth performance in the current financial year FY23. The company’s consolidated revenue from operations rose 31% year-on-year to Rs 69 crore (Rs 690 million) in the full fiscal year that ended March 31.
Business Expansion Plan
Maximus, which currently has manufacturing units in the UAE and Kenya with a combined installed capacity of around 20,000 kiloliters per year, is looking to expand its footprint in East Africa, Raval said.
The company recently said it plans to invest Rs 25 crore to expand its East African operations and triple its production capacity to 60,000 kl/y over the next two to three years.
To meet the target, Maximus will increase the production capacity of its existing facilities as well as set up a new manufacturing facility in Tanzania, or any other geography in East Africa, Joshi said.
The first phase will involve establishing a trading unit in Tanzania and after witnessing its performance in the market, the company will move on to the next stage of capital expenditure, which could start in the second half of 2023, he added.
Raval said the company will set up a trading unit in Tanzania by the end of this year as well as in Rwanda, Uganda and Congo, and penetrate these markets via distribution network.
He added that Maximus doesn’t have any manufacturing facility in India, but the company has set its eyes on establishing a research and development center in the country going forward to further improve products.
Talking about business expansion in other markets, Joshi said Maximus is also eyeing Southeast Asian countries. “We are conducting the feasibility study,” he added, noting that the company will look at Singapore, Malaysia, Vietnam and Indonesia as potential markets in the future.