Tuesday May 14, 2013

Tile manufacturer aims to exceed RM500mil in sales this year

By JOY LEE
joylmy@thestar.com.my
Photos by Brian Moh

On better stand: Bong says the company has grown competitive after venturing abroad.

HOMEBUYERS may lament the rise and rise of property prices, but some industries see opportunities in this trend.

One of them is the tile manufacturing industry.

As Niro Ceramic Group managing director Bong Kuan Shin aptly puts it, “Purchasers have already spent so much on their property, they don’t mind spending more to dress up the property.”

And with the recent acquisition of a Spanish tile producer, Bong said local tile manufacturer, Niro is positioned for tremendous growth.

Bong, who was from the banking industry, joined the group as managing director in the 1990s and has helmed the company ever since.

“I was bored of banking then and I thought running a factory might be fun. But 20 years is a long time for a job,” he said.

A lot has changed in the last 20 years. Back in those days, its manufacturing facility in Johor made an average annual sales of about RM30mil.

Last year, Niro posted revenue of RM400mil. Bong hopes to exceed RM500mil in sales this year and hit the sweet RM1bil mark in three to five years time.

“In most of the markets that we are in, we have less than 10% market share. So we have a lot of room to grow,” he said.

Swiss origins

Niro was originally founded in Switzerland in 1979 by Danish businessmen. Niro’s classy ceramic tiles became known worldwide and the group decided to expand into other regions.

Even in the 1980s, Asia was already showing signs of a promising market and the group decided to move its operations here.

Niro’s Danish owners set up a production facility in Johor together with some local partners but eventually sold out their stake to the local partners.

Currently, Niro is 53% owned by Glenmarie Estates Sdn Bhd, 25% by United Malacca Berhad and 22% by Hicom Holdings Berhad.

“So it is a 100% Malaysian company now,” said Bong with a smile.

The company’s Swiss heritage can be seen particularly in its quality and design.

Bong noted that European ceramic producers, particularly in Spain and Italy, were the most established in the world and has the best quality and design. Spain alone has some 300 to 400 tile factories, most of which started out as traditional family-owned businesses.

In Malaysia, Bong noted that there were only about 12 to 13 manufacturers.

Its Swiss origins have served it well as Niro is targeting the higher-end market where design matters more than pricing, said Bong, adding that the high-end market grows at about 7% to 8% per annum.

While most local manufacturers concentrate on the volume game, Bong said Niro is focused on fine-tuning its designs for high-end clients.

Venturing out

Following the localisation of the business, Niro had concentrated on the domestic market, much like other local tile producers.

Bong said it was easy to feel right at home in the local market as it was big enough for everyone to have a comfortable share of the cake. Additionally, the market was protected by import duties which made imported products affordable only to a small segment of the market.

However, Niro was forced out of its comfort zone at the height of the Asian Financial Crisis as the industry suffered from a crash of the property market.

Niro started looking abroad to spread out its market but Bong said the venture was a tough challenge as the group was not equipped to take on new markets and its design portfolio fell short of international standards.

“We had to improve ourselves even when we couldn’t afford it. We hired designers from Europe and we eventually learned to make our own designs. It was a tough bullet to bite but we have grown competitive. You must deserve your profit,” he said.

Niro has since set up manufacturing sites in Indonesia, China and Vietnam to cater to demand from all over the world.

Currently, about 60% of its revenue is derived from exports to over 70 countries.

Bong noted that its new markets such as the Middle East and South America grow by about 20% per annum in comparison to the local market which grows at about 10% to 15% every year.

New technology: Digital printing gives ceramic tiles the patterns and textures of other materials like wood.

Having focused on Asia after it ventured abroad, Bong started looking for opportunities to penetrate the Spanish market about three years ago when manufacturers there were battered by the Euro Crisis.

“We cannot stay put. I think we inherited the adventurous Viking spirit from our European origins,” said Bong.

Last month, Niro finally succeeded in its Spanish dream following the acquisition of Zirconio SA Spain at a price tag of ‚9mil.

Bong said Zirconio is one of the leading Spanish manufacturers of ceramic tiles with a capacity of 7mil sq m per annum.

The acquisition effectively doubles Niro’s production capacity and gives Niro access to Zirconio’s global customer base.

“Zirconio complemented our production of porcelain tiles. We see significant synergies that we can extract from this acquisition. Of course, we will only be able to see the full benefits after about three years,” Bong said.

According to him, Zirconio is currently running at 15% capacity but his team is looking at increasing its usage by increasing sales of Zirconio-produced tiles to Asia and by moving some of Niro’s production to Spain.

He is confident that Zirconio’s capacity will be used up in two to three years.

Niro is also in the midst of upgrading its manufacturing facilities in Asia and has set aside some RM10mil to implement digital printing technology in its Johor plant.

Bong said manufacturers need to be competitive as local players have started moving regionally due to globalisation.

He added that its purchase in Spain has bumped Niro to an international manufacturer.

“When you cater to a region, you don’t get to enjoy the global economy of scale,” he said.

But the tile industry is a fragmented industry.

The global ceramic tile industry, which grows at 3% to 5% per annum, produces an average of 6bil to 8bil sq m of tiles a year. But Bong noted that one of the largest players in the market produces only 100mil sq m per annum, which makes up about 2% of market share.

Thus, there is more room for consolidation in the future and the possibility of more acquisitions.

Niro’s next destination is India.

Bong remarked that the average Malaysian consumption of tiles come up to 3 sq m per person while the average consumption in India is 1.5 sq m per person. In comparison, consumption elsewhere is 4 to 5 sq m per person.

“We are happy with where we are going. With over 20 years of experience, Niro is positioned for tremendous growth,” he said.

Source:

News

Tuesday May 14, 2013

Tile manufacturer aims to exceed RM500mil in sales this year

By JOY LEE joylmy@thestar.com.my Photos by Brian Moh

Source:

By JOY LEE
joylmy@thestar.com.my
Photos by Brian Moh