Wednesday, October 5, 2011

Hong Leong Asia

Published October 5, 2011
Hong Leong Asia to think outside China


CHINA will keep driving business, but Hong Leong Asia's new chief executive has set his sights on growing revenue from other emerging economies too.

Mr Yuen: May add a fifth business stream of providing after-market technical services

Francis Yuen, 61, who took the helm at the diversified group in May, six months after former CEO Teo Tong Kooi resigned, has big plans and a clear goal - to deliver more sustainable earnings growth.

HLA now rakes in 80 per cent of its business from China. While sales there will keep rising, Mr Yuen wants to 'grow even faster outside'. The plan is to power ahead in emerging economies like Indonesia and Vietnam, and reduce reliance on China to 65-70 per cent in the next five years by exporting from China to the region.

He sees potential to improve the industry positioning of each of HLA's four existing business lines - home appliances (Henan Xinfei Electric), diesel engines (US-listed China Yuchai International), cement (Tasek Corp) and industrial packaging (Rex Industrial Packaging and GPac Technology) - by expanding product portfolios.

There is a 'definite future' for China Yuchai, given the 'number of trucks, trailers, buses, railways, plying China, with room for many more', he told BT. The question now is: 'Are we in the diesel engine industry, or can we define ourselves to be in the wider transportation system industry?'
Similarly, Xinfei, whose profitability has taken a hit with heightened competition, may go from making refrigerators to other comfort systems. Methods of sales may vary too, says Mr Yuen, throwing out ideas like packaged home solutions to developers under the Hong Leong group and growing exports.

Acknowledging that HLA is looking to divest its industrial packaging business, Mr Yuen says migrating to higher-end medical packaging could make that arm worth keeping. HLA will make a decision by the year-end.
As for the 'good old traditional founding business of Hong Leong', the cement business, growth will continue on the back of construction demand locally and in Malaysia. Even so, HLA can 'add on business threads' to tap on the wider 'building materials' sector, he says. Smaller stakes in consumer electronics and hospitality are on the cards.

But Mr Yuen sees room to add a fifth business. This may involve providing after-market technical services of some form, says Mr Yuen, whose past 18 years of private sector experience has taught him that 'such services make a good accompaniment to the hardware' of a company. A complementary line could also help even out currently cyclical earnings.
None of this is set in stone yet, says Mr Yuen, who recently met HLA's fresh team of senior management to re-evaluate business strategies and craft a five-year plan.

It is a diverse team he has pulled together, says Mr Yuen, who aims to fill key management roles by the year-end. He will strengthen the export and M&A teams, to focus on new markets and inorganic growth, a priority for 2012.



My Thots......

There was a better write-up in "The Edge"....
Reducing reliance on China?
The implicit takeaway from this article seems to be that the China mkt is not sustainable?
This is definitely not correct !! China is too important a market, in fact diesel engine sales are still growing at healthy rates (pricing and product positioning aside)  and that is where HLA's crown jewels, CYL & Xinfei does almost all of of its biz, presently. The correct message should be to diversify CYL's  & Xinfei's markets by exporting to rapidly developing mkts like Indonesia & Vietnam; from China.
Thinking outside China does not equate to getting out of China or not doing biz from/in China!
In fact, producing from China to export to new emerging mkts, give HLA a huge competitive advantage as it allows product segmentation and re-positioning  opportunities!!

High quantity low margins now....
Towards higher quality , higher margins, sharper focus.

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