A large company from tall oil

Talouselämä 18/2004, Esko Rantanen

Chemical Industry

Forchem, which distills tall oil, made profit in its first year of operation.

The product of the Rauma tall oil distillery is not visible to the average consumer, but they hardly avoid being in touch with it. Distillation products, resins and fatty acids, are found in alkyd paints, adhesives, inks and lubricants.

However, the obligation to reduce CO2 emissions threatens to kill Forchem in its infancy. CEO Martti Fredrikson believes that the burden of emission restrictions must be prevented. Forchem has made a proposal to the Ministry of Trade and Industry.

Emission stress can be eliminated, for example, by removing the carbon dioxide burden from crude tall oil as a substitute fuel in the pulp industry. Then the forest industry would be forgiven for the environmental costs of tons of carbon dioxide caused by the industry using fossil fuels instead of crude tall oil.

Forchem’s turnover last year was EUR 34 million. The time to market was, to put it mildly, not the best possible, because recession in Europe. However, the company expanded production in its first year.

Forchem’s demand was improved by customers being given an alternative to Arizona Chemicals’ Nordic monopoly.

“In a few years, we will be running 150,000 tonnes of crude tall oil. Last year, the amount was almost one hundred thousand tons”, says Fredrikson.

This tonnage may also be exceeded. Accordingly, net sales will also rise to EUR 50–100 million. Thus, in a few years, Forchem will rise to the caste of large companies, for example to the Talouselämä 500 list. The lower limit of turnover this year is EUR 58 million.

Forchem can also grow through acquisitions. Admittedly, the company is so young that it doesn’t have much muscle on its own. The main competitor, Arizona Chemicals, is owned by the American paper giant International Paper, which has a large mill in Oulu. According to recent market rumors, IP has put Arizona back on sale. In the United States, Georgia-Pacific sells its entire chemical industry, of which tall oil is a part.

 

Initially, Forchem’s starting points were not only techno-economic calculations, but also national considerations. While working for the rival cmpany, Arizona Chemicals, Fredrikson and CFO Hannu Näsi saw that tall oil has a place for Finnish know-how and a niche market. In the global chemical industry, tall oil is a small by-product.

In addition to the management, Forchem is owned by the Finnish private equity funds Biofund Management Oy, Nordea Capital Oy, OKO Venture Capital and the state Industry Investment Oy. With these funds and bank loans, Forchem made an investment of EUR 65 million

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