Supportive to set up toy plant in Vietnam
Written by Writer on Monday, October 13th, 2008
Supportive to set up toy plant in Vietnam
By DAVID TAN
It is finalising a US$15mil deal to supply toys to IKEA
SUPPORTIVE International Holdings Bhd will expand its toy manufacturing business to Vietnam early next year.
Group executive chairman Lee Kuang Shing told StarBiz the company would initially lease a 10,000-sq-ft plant in Ho Chi Minh City.
“The rationale for going into Vietnam is that we are finalising a deal with IKEA, the Swedish-based toy and furniture retailer, to obtain a three-year US$15mil contract to manufacture wood and plastic-based toy products,’’ he said.
“The move will also bring us close to IKEA’s operations in Vietnam.”
About US$5mil will be injected into the facility, which will create 300 to 400 jobs.
Lee said Supportive would serve as original design manufacturer (ODM) for IKEA.
Supportive International’s manufacturing facility in Taman Ria Jaya, Sungai Petani.
To stay competitive with its pricing and reduce production costs, the company will source plastic and metal raw materials directly from suppliers in China, thus bypassing the high-cost middlemen.
Supportive has a plant in Taman Ria Jaya Industrial Estate, Sungai Petani, which also manufactures for IKEA.
The toy manufacturing business for IKEA should generate about 25% of Supportive’s turnover for the 2009 fiscal year ending next January, Lee said.
On its home theatre system manufacturing business, he said the group had just secured contracts from JVC and Yamaha with an estimated value of US$10mil.
“We will provide ODM services and deliver the finished products to them,” he said.
He added that the raw materials and cables used would be directly sourced from suppliers overseas to keep production costs low.
Lee said Supportive also produced home theatre systems for Panasonic, its customer for the past 10 years.
“Annually, we manufacture RM100mil worth of home theatre systems for Panasonic,” he said.
Supportive specialises in manufacturing the speaker component of home theatre system.
The company makes home theatre systems in a second facility located at Taman Ria Jaya Industrial Estate and he estimates that the facility would be over 90% utilised by next year.
Lee said the group planned to allocate about RM30mil yearly as working capital to upgrade its plants in Sungai Petani.
“First, the labour cost in Sungai Petani is low, even lower than in Shenzhen and Dongguan in China, thus allowing us to engage about 800 workers for our manufacturing operations in Sungai Petani.
“Second, we are close to the Panasonic headquarters for Asia-Pacific in Singapore and Johor Baru. This enables us to deliver on time via land routes and reduce the cost of transport,” Lee said.
He added that Supportive had arrangements with its customers to absorb the higher charges of fuel and raw material costs.
On the group’s property business, Lee said Supportive was launching in phases residential landed properties and high-rise homes in Teluk Air Tawar, Butterworth, starting early next year.
“The properties, with gross development value of RM360mil, will be launched in stages according to market demand.
“We plan to complete the project by the end of 2012,” he said.
Lee said that so far, Supportive had launched 247 units of three-storey terraced houses for the Aman Bayu project, of which over 50% had been sold.
“About 30% of the properties launched have been completed,” he said.
The property segment is expected to contribute between 5% and 10% of the group’s turnover for the 2009 fiscal year ending next January.
Lee said that for the 2010 fiscal year, the contribution from the property segment should hit about 50%.
“We will look for land on the island and mainland to launch more residential projects,” he said.
Listed on the main board, Supportive started off as Supportive Technology Sdn Bhd, a small and medium company with a start-up capital of RM1mil.
With just five plastic injection-moulding machines, the company gradually grew, adding more equipment to its facilities and expanding its range of services.
In 1998, Supportive expanded to integrate a 4,286-sq-m factory into its original premise at Taman Ria Jaya.
In March 2008, it completed a reverse takeover of SDKM Fibres, Wires & Cables Bhd and was listed as Supportive International Holdings Bhd.
