Natural rubber company Sri Trang Agro-Industry (STA) has navigated through several recent tumultuous years. Throughout this period, the company grappled with the fluctuating natural rubber prices, weather conditions, persistent concerns surrounding prolonged high interest rates and the disruptive impact of geopolitical crises on demand and supply dynamics.
Leveraging its robust fundamentals, however, STA has managed to continuously demonstrate outstanding performance — emerging as the winner of the Billion Dollar Club 2023 award for return to shareholders over a three-year period in the automobile and auto-parts sector.
“Being in the commodities business, each year is different — there are great years, average years and years that are a bit more difficult to manage. Unfortunately, most years are the latter, but our team across the Sri Trang Group have worked hard to ensure growth and outperformance,” says STA managing director and CEO Veerasith Sinchareonkul.
“In fact, we have regularly paid dividends across the past 20 years, safe for 2017 when we took a big hit from the highly volatile commodity prices,” he adds. For its FY2021, STA paid a total dividend of THB4.15 per share, an all-time high on the back of record high net profit of THB15.85 billion.
This is as glove “became gold” during the demand spike in Covid-19, as STA’s glove business subsidiary’s contribution to the group revenue grew exponentially. That said, unlike some of its industry peers, STA had been investing in its glove-making business since 1989. This follows the vision of its founder and team of directors, allowing the company to enjoy decent revenue from the operations before taking in the past few years’ demand bonus.
“Nevertheless, we continually remind ourselves not to dwell on past achievements. We approach the future with a sense of caution as we prudently manage expenditures and optimise efficiency, focusing on maximising output while minimising the use of resources. This mindset positions us well to adapt to the eventual normalisation of glove demand,” Veerasith said.
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Achieving sustainability goals
Established in 1987, STA began as a small rubber trading company in South Thailand before gradually expanding its operations. It hit a significant milestone in 1992, when the company was publicly listed on the Stock Exchange of Thailand (SET). Fuelled by fresh capital, STA scaled its business to markets like Singapore, US, Indonesia and China, leading to an eventual secondary listing on the Singapore Exchange S68 (SGX) in 2011.
Amid the Covid-19 pandemic in 2020, STA’s glove-making subsidiary Sri Trang Gloves STG (STGT) went public on the SET, subsequently secondary-listed on the SGX in the following year.
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Today, STA’s business consists of upstream rubber plantation engagement, midstream natural rubber products processing and distribution, and downstream gloves production and distribution, among others goods. STA manages 7,500 hectares of rubber plantations and other economic crops in 19 provinces of Thailand, with an annual production capacity of 3.42 million metric tonnes as at the end of June 2023 — the largest in the industry. Meanwhile, its downstream operations have an annual production capacity of 55.3 billion pieces — the largest gloves manufacturer in Thailand.
While it has been focusing on production, STA is also simultaneously working on its dedication as a “Green Rubber Company” as it continues to highlight its sustainability and transparency efforts. This is as Thailand plays a crucial role in global rubber production, supplying over 30% of the global market volume. The country’s commitment to environmental, sustainability and governance principles as well as carbon neutrality in rubber production aligns with STA’s sustainability focus, Veerasith said.
STA’s sustainability commitment is emphasised through its sustainability strategy called the “4 Green” strategy, which is comprised of “green products” (ensuring products are free of chemical substances that detrimentally affect the health and safety of end-users), “green procurement” (sourcing raw materials from ethical suppliers with sustainable practices), “green process” (ensuring production without adverse impact on the environment and the neighbouring communities) and “green company” (ensuring good governance and people management).
The company has achieved various important milestones in its sustainability journey thus far. For one, it is the world’s first fully-integrated rubber company to certify Forest Stewardship Certification (FSC) for its whole latex supply chain in 2019. Additionally, over 28,000 raise (4,480 hectares) of its rubber plantations have received FSC certification.
As the company further reaffirms its green rubber commitment, STA seeks to be carbon-neutral by 2030 and aims to achieve the Net-Zero Emissions target by 2050, done via greenhouse gas (GHG) emissions reduction as well as carbon offsetting and carbon sequestration. To reduce its GHG emissions, the company has been implementing energy efficiency and process improvement projects, aside from utilising electric vehicles in business processes and increasing the proportion of renewable energy consumption, such as biomass energy and solar power in business operations. In fact, over 70% of the company’s productions now rely on renewable energy, Veerasith said.
Last year, the company completed the installation of the floating solar power project at its facility in Mukdahan province. The company has registered the project with the Thailand Voluntary Emission Reduction (T-VER) programme in order to certify the amount of GHG emissions reduction from the project. The company is also expanding the floating solar projects to its factory branches in Thung Song, Huai Nang and Udon Thani. Furthermore, the company has registered its rubber plantations with the T-VER programme for the carbon credits certification. Based on the development of these initiatives, STA is confident that it is able to reach its carbon neutrality by the set deadline or even earlier, Veerasith adds.
Digitalisation efforts
Although STA has stayed resilient and sustained its operational performance in recent years, the company acknowledges that it cannot afford to stay complacent. Therefore, the company has introduced forward-looking initiatives such as the “Sri Trang Ecosystem”, a sustainable supply chain that caters to the needs of all stakeholders.
Sri Trang Ecosystem helps the company to digitalise, ensuring that data is stored accurately and on a real-time basis especially as it deals with many vendors and thousands of trading transactions everyday. It also assists in making STA’s operations more transparent, ensuring better traceability from rubber tree cultivation to the delivery of traceable products.
This is made possible with the introduction of two mobile apps — ”Sri Trang Friends” and “Sri Trang Friends Station”, which enable the company to online-purchase rubber from Thai rubber farmers, traders and partners anytime, anywhere. This helps reduce the number of procurement centres located in many areas, effectively reducing the company’s fixed costs, Veerasith explains.
But that is not all — STA also has numerous research and development projects, covering all product groups to improve the efficiency of production processes and enhance its products quality.
“For example, we have previously introduced the world’s first non-detectable protein latex gloves, which have been proven to have non-detectable levels of the four principle allergenic proteins. This means that people with protein allergies can use our latex gloves without any concerns. We hope to launch more innovative and sustainable products in the near future,” Veerasith said.
Moving forward, Sinchareonkul is positive that the STA is able to achieve its natural rubber production capacity target of 4.16 million metric tonnes per year by 2025. He believes that with the team of highly talented and skilled workforce coupled with technological advancements and efficient cost management, the company is able to meet its goals, ramp up production and reap future opportunities.
