The Executive Talk: SVI PCL (SET:SVI) Becoming a global EMS play
BANGKOK, Nov 30, 2018 – (ACN Newswire) – SVI PCL (SET:SVI) Chief Executive Officer, Mr. Pongsak Lothongkam discusses the company’s strategy and outlook in The Executive Talk (TET) by ShareInvestor.com.
TET: How has the company evolved in terms of the types of products/services that it manufactures for customers in the past 5 to 10 years?
SVI has grown tremendously in the past decade with several key changes occurring in the past few years. In 2016 we acquired Siedel Group that gave us a premier presence in Europe with factories in Austria, Slovakia and Hungary. We have acquired 44 rai of land in Cambodia, Phomn Penh, and during the third quarter of 2018 opened our first facility of 10,000 sqm. These two developments combined with the four buildings of 50,000 sqm in Thailand, sales and purchasing offices in China and Denmark demonstrates that SVI has the full services, footprint and capabilities necessary to be a global EMS organisation.
TET: How has the M&A with Siedel benefited SVI?
The acquisition of Siedel has been tremendously beneficial for SVI because it gives current and future customers a sense of security with our multiple factory locations, it turns SVI into a global player and we are able to attract larger customers. In addition to this the financial performance of Siedel has improved, in the first year their revenues were 65 million euros and lost nearly 1 million euros, now it has achieved 90 million euros in revenue and a profit of nearly 1 million euros per quarter.
TET: SVI’s financial performance appears to have recovered strongly recently, what is/are the reason(s) for this?
This is driven by a combination of factors, firstly the acquisition of Siedel naturally increased our business from their existing customer base, but as mentioned it’s now the ability to continual attract new and larger customers that has been able to drive our growth. This has coincided with the materials shortage issue during the second half of 2017 abating. In terms of top line growth, we foresee that revenues coming from our European operations will reach EUR 90 million or USD 100 million in 2018 and USD 120 million in 2019 mainly coming from strong existing customer growth. Additionally, we have a strong concrete pipeline of new customers of roughly USD 100 million in 2019 through our operations in Thailand. Going forward we have announced that our revenues should reach USD 480
million, an improvement from USD 240 million in 2015, representing about USD 120 million per quarter which is very achievable. Based on the existing customers growth and new customers that I’ve mentioned, we target to achieve revenues of USD 600 to 640 million in 2019.
TET: What do you think investors misunderstand about the business?
The misunderstanding comes from the changes in the industry dynamics. In the past a firm would design their products and manufacture themselves, distribute and so forth. This then evolved to firms designing their products and manufacturing firms specialising in manufacturing one, two, or three items at the most. Today, SVI is positioned as an EMS that can produce 350 different products per month with a strong specialisation in AC-DC drives, medical devices and cameras. This allows us to attract firms that have great ideas with strong capital support. Perhaps out of 26 products there are only 3 winners, but this then puts us in a position of strength ahead of the other manufacturers in the market because we have established the relationship and proven our ability to
manufacture their products. We have proven this in the past with SVI’s growth and expect in the future that our growth is driven by the specialised products.
TET: What impact would or have trade wars had upon your industry and business?
The actions from the US government does deter us from investing or acquiring directly in the US. Their strategy is unfortunately for them, short-term oriented, and thus we will look at other markets as mentioned earlier for acquisition and expansion opportunities.
What we see occurring as well is that our new customers are moving or closing their facilities in the US and China and coming to Thailand. This could be as a result of fears of tariffs, costs, or China not focused upon the export market and instead focused on internal consumption.
TET: SVI has a significant amount of cash on its balance sheet. What are the plans to allocate this capital effectively?
With Siedel, SVI now has Europe and Asia, there are effectively two markets left for us to expand into, America and Japan. Our plan is also to expand via acquisitions and our own manufacturing operations throughout the globe and later this year we will have another location in Eastern Europe. For the coming years we plan to open a new factory every year. In addition to this we are internally undergoing multiple projects to strengthen our internal process. For example, we have invested in SAP’s IT System, we have EY Consulting working on developing a digital purchasing system, and brought in teams from Taiwan to work on automation. In the future
we see the possibility of Europe being fully automated, Thailand partially automated, Cambodia doing back office operations and India being a global support centre.
TET: Where do you see SVI in five years from now?
SVI now has the foundations to become a global EMS player, with our internal operational improvements and our plans to continually expand throughout the world. I am firmly of the viewpoint that focusing on the long-term sustainability of the business is important and that as we create the value and the market will pay for it.
About The Executive Q&A Series
The Executive Q&A Series is presented by ShareInvestor, Asia’s leading financial internet media and technology company and the largest investor relations network in the region. The interview was conducted by Pon Van Compernolle.