Staying ahead in a tough business

Staying ahead in a tough business
Mr Koh Boon Hwee.

Sunningdale Tech is a generally well-managed company which was previously led by Koh Boon Hwee with his vast experience and financial capability. In 2011, the group achieved a record revenue of S$426.1 million and a net profit of S$12.3 million before the impairment loss of goodwill of S$23.7 million. Including the impairment of goodwill, the group recorded a net loss of S$11.4 million.

Contract manufacturers and plastic parts makers continue to face tough competition and pricing pressure from customers. What more can Sunningdale do to upgrade its technology and processes so that it is the preferred partner of customers?

The group's balance sheet has improved in the past few years. Net debt (including current liabilities) to equity ratio was a healthy 0.5 at end-2011. How can Sunningdale use its balance sheet strength to take it to a higher operating plane in the sectors in which it operates?

Is investment in R&D and organic growth the way to go, or should it be more aggressive again in acquisitions, to add to its portfolio of products and services?

Mano: Please tell us about your group: its origins, current business and overall size.

Khoo Boo Hor: Sunningdale Tech Ltd is a leading manufacturer of precision plastic components. The group was formed through the merger of Tech Group Asia Ltd and Sunningdale Precision Industries Ltd in July 2005. The group provides one-stop, turnkey plastic solutions, with capabilities ranging from product and mould designs, mould fabrication, injection moulding and complementary finishings to the precision assembly of complete products.

Boasting a total factory space of more than 2.5 million square feet, with more than 600 injection moulding machines and a tooling capacity of 2,500 moulds per year, Sunningdale Tech is focusing on serving four key business segments - automotive, consumer/IT, healthcare and tooling.

With manufacturing facilities across Singapore, Malaysia (Johor), China (Tianjin, Shanghai, Suzhou and Zhongshan), Europe (Sweden and Latvia) and Mexico (Guadalajara), Sunningdale Tech is strategically positioned to target and capture opportunities in diverse business sectors from reputable customers globally.

Mano: What is your business model and strategy and how did you get to where you are now with your competitive advantages?

Khoo Boo Hor: The year 2006 was a challenging one for the group when one of the major telecommunication customers changed its procurement strategy to the ODM (original design and manufacturing) model which resulted in lower capacity utilisation. The group also anticipated trends in mobile phones moving away from plastic keypads to touchscreen technologies. Many suppliers in the industry were not spared. We also faced higher resin prices and pricing pressure from customers which affected margins.

In response to the challenges, the group took the strategic decision to convert the telecommunications capacity to other business segments, especially automotive, because of its long experience and solid reputation in this region.

The group also embarked on a restructuring exercise to optimise regional production resources, moving production to more cost- competitive locations, transforming Singapore into a management hub overseeing higher value activities such as global business development effort, programme development, process engineering, research and development work and overall management of the group.

Then in 2008, oil rose above US$140 (S$171.3) a barrel and the US dollar was at its weakest in the first half; orders began to fall as the global financial crisis hit. The US went into recession in the fourth quarter. The automotive segment was the hardest hit. Demand for automobiles in North America was expected to be the lowest in several decades. Automakers were all cutting back production and inventories.

However, not all things were bad. The group had many successes in the consumer/IT segment. The group was awarded several high-volume precision moulding and assembly projects. It also successfully acquired assets in Mexico to increase production because of its successful business relationship with a customer in Asia.

The healthcare segment, which has a longer gestation period and which the group had targeted for growth in 2006 due to more outsourcing of projects to Asia and more demand originating from Asia, started to yield some results.

Our competitive advantages are our tooling capabilities, expertise in high cosmetic parts, protection of customer's intellectual property, credibility in our healthcare business, scalable robust system and processes that we have built over the years.

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