Malaysia's Largest Laminated Board Maker Enters New Era
Panels & Furniture Asia, Feb/Mar 2005
LIMAHSOON Berhad is one of the many producers
of finger jointed laminated boards using rubber wood in
Malaysia. But it stands out as one of the few integrated
manufacturers - from sawmilling to the completion of the
boards. "We control every process, which ensures quality,"
said Mr Lim Chong Khim, its Managing Director. He explained
that in doing so, LIMAHSOON gained from the various production
stages. Mr Lim pointed out, for example, that while other
manufacturers buy kiln-dried timbers, which are more expensive
and may lack quality control, LIMAHSOON has its own pressure-treatment
facilities and kiln dryers.
"That's why we can produce top-range laminated boards
at competitive prices. We start from our own sawmill, followed
by pressure treatment, kiln drying and finally finger jointed
lamination. We have efficiency and cost competitiveness.
Everything is done in house, which is one of our main competitive
advantages."
Manufacturing quality laminated and aesthetically pleasing
boards is one of LIMAHSOON's trump cards. One distinctive
feature of LIMAHSOON products is their uniform colours,
which is popular with numerous furniture producers in Malaysia.
"
A
lot of furniture makes buy from us because we can supply
boards of our consistent colours," said Mr Lim. "This
is achieved because we have a substantial volume of raw
materials where we can implement colour selection. Oxidation,
which darkens the wood, is also kept to minimum. As a result,
we can achieve and maintain very uniform colours in our
boards.
Other manufacturers may use the same raw materials, but
due to inadequate volume and different production process,
the colour of the boards may vary."
Mr Lim revealed that this proven quality is part of LIMAHSOON's
winning strategy, and one that have given the Malaysian
company "a lot of advantages". It has obviously
contributed to its status as Malaysia's largest supplier
of finger jointed laminated boards. This, in turn, inspired
confidence among its existing and new customers alike. The
manufacturing process is controlled by the company's Quality
Assurance Programme. In 2000, LIMAHSOON implemented ISO
9002, which provided strict guidelines in terms of steps
and procedures to follow.
"Our quality assurance system undergoes constant review
to seek improvement and enhancement," said Mr Justin
Liew, LIMAHSOON's General Manager. "It is also not
limited to production and products. Our services, for example,
are regularly upgraded based on suggestions and feedbacks
from customers and staff."
Added Mr Lim: "Apart from ISO requirements, we have
implemented additional internal measures to ensure our quality
is up to the mark. As the largest laminated board maker
in this country, our customers know they can count on us.
Added Mr Lim: "Apart from ISO requirements,
we have implemented additional internal measures to ensure
our quality is up to the mark. As the largest laminated
board maker in this country, our customers know they can
count on us.
"Besides delivering quality products, our buyers know
they can be absolutely confident with our delivery. If we
promise, we deliver."
Mr Lim cited LIMAHSOON's high customer retention to underscore
this point. A number of public-listed furniture makers -
some of the best known names in Malaysia's furniture industry
- such as Lii Hen, Latitude Tree, and Kimble Furniture,
are its long-term customers. Because of its sterling reputation,
customers usually come to LIMAHSOON when they produce high-end
furniture.
"Some of our customers' buyers even specify that they
buy their laminated boards from us," said Mr Lim.
As a result of overwhelming demand and its many long-standing
customers, only a handful of LIMAHSOON's 500-strong staff
is involved in sales and marketing.
"We don't have many sales staff since customers usually
approach us. Rubber wood laminated board is a commodity.
We differentiate ourselves from other players by emphasising
on quality, delivery and service - factors which are close
to every manufacturers' heart. To maintain this and in view
of our increasing customer base, , one of our immediate
plans is to increase capacity."
Expansion plans, already in the works, are boosted by funds
raised from its recent public listing on Malaysia's second
board.
Some RM3.6 million of RM24.7 million raised will go to
capital expenditure, which is mainly for the construction
of a new factory.
The transformation from a family enterprise started by
Mr Lim Ah Soon, the father of Mr Lim and his brothers, into
a public listed company, was not a difficult process, according
to Mr Lim.
"One
of our first moves was to bring in new management expertise.
The company needed to be managed more professionally to
tap the resources of the market so that LIMAHSOON can expand
further. We recognised that there are areas we need improvement
and this is where the new blood has the potential to make
a difference"
As one of the professional managers brought in to oversee
the changes in the company, Mr Justin Liew noted a commitment
of the previous management to accept changes.
"Moving out of the comfort zone definitely has its
challenges," he said. "But I believe the management
has adapted well. They recognised the need for a more open
and transparent management style. They have also acknowledged
that the company has increased in size. Jobs have to be
dedicated and the new people in charged must be empowered
to run the show. Essentially, the company already has a
high performance culture. By incorporating professional
management, we hope to hone this further and bring the company
into a new growth era. The new management team will ensure
that the company is run along the strategy that has been
set as well as focus on growth and profitability. On the
other hand, it is important that the previous management
remain actively involved because of their production expertise,
experience and network established over the last 18 years"
Besides raising funds, the public listing helped create
greater awareness of LIMAHSOON, added Mr Liew.
"We are already the market leader. Getting listed
will enhance the company's image. It also helps in getting
funds from financial institutions since a listed company
is often required to practise better corporate governance.
"Another
reason is to let our employees, customers and suppliers
participate in the growth of the company. Their support
is invaluable and this is how we recognise their efforts."
The public listing process started in 2002. Criteria for
second board listing included attaining upward profit trend
for three consecutive years and having paid up capital of
RM40 million. LIMAHSOON also needed to be export-oriented
to enjoy certain tax breaks - such as the waiver of a 10
per cent sales tax - as well as to qualify for foreign workers
application.
But although about 97 per cent of LIMAHSOON's products
are consumed domestically, it qualifies as an indirect exporter.
Mr Lim explained: "We supply to furniture manufacturers
who export their entire output. As a result, our products
are eventually exported. From the perspective of rubber
wood furniture makers, we are in a strategic position because
we provide vital support for the industry."
The remaining 3 per cent of LIMAHSOON's output are shipped
to Germany, Japan, Korea and India. When the new factory
begins operation, Mr Lim hopes to expand its overseas market
in an effort to diversify.
"We will continue to supply to the domestic market.
But as a public company, we feel it is only wise if we spread
our risks."
Europe, especially the burgeoning furniture industry in
Eastern Europe, is one option although at this point, Mr
Lim is reluctant to reveal more details. China, which also
has a thriving furniture-manufacturing industry, is the
other. Mr Lim recalled China as one of main export destinations
a few years ago when domestic demand was slow.
But when prices of laminated board dropped in China, LIMAHSOON
decided to re-focus its attention on the domestic market.
"I don't foresee any problems getting our products
into Europe or China," he stated.
Other plans in the pipeline include an ambitious project
to consolidate rubber plantation small holdings.
Said Mr Liew: "There are many small rubber plantations
in Malaysia. In order to make economic sense, we are trying
to get them to consolidate. The aim is to create a critical
mass, rather than fragmented, small plantations. Our job
is to co-ordinate and help these owners produce the latex
as well as re-planting by providing them with resources
and giving them support in terms of getting better equipment,
R&D and so on. What's in for us is we get the wood for
our raw materials." The project is admittedly challenging
because of the many parties involved. It is also expected
to be lengthy and complex.
"What we need to do is to let the plantation owners
see the advantages and benefits so that they will work with
each other and with us," he added.
The sustainable supply of rubber wood is obviously a matter
close to the heart of those involved with LIMAHSOON.
The scenario is simple: if there is a shortage of rubber
wood, the company will be directly and severely affected,
its state-of-the-art equipment and production processes
notwithstanding.
Thankfully, Malaysia's re-planting rubber wood replanting
programmes deem this to be a non-issue, an important point
that is noted by financial analysts prior to LIMAHSOON's
public listing and government officials alike.
"We have not experienced any supply problem," said Mr Lim.
"Malaysia has one of the world's largest rubber wood
plantations. Although there are fluctuations from time to
time, over the long term the sustainability of supply is
not an issue."
He noted, for example, that the area of re-planting in
Malaysia has increased more than one per cent over the last
10 years, resulting in 1.4 million hectares of rubber wood
plantation in 2003.
Even if re-planting were to stop with immediate effect,
there is enough to go around for another 50 years.
"The rubber and rubber wood industry contributes some
RM40 billion to the country, of which rubber wood furniture
has a share of RM5 billion in 2003. It's a big income generator
for the nation. The sustainable supply of rubber wood, therefore,
is one that the government would ensure because so much
is dependent on it."
Such a policy, along with several other factors, has made
Malaysia a good place for investments, added Mr Lim.
"The supply of rubber wood is a key factor, with raw
materials currently making up about 50 per cent of our overall
costs." he said. "If we can continue to employ
foreigners in our workforce, I feel we can still be competitive
with countries like China and Vietnam, places where although
labour cost is cheaper they have to pay more for raw materials."
He also pointed out that with the United States' Department
of Commerce recent ruling on the Antidumping petition, which
imposed duties on Chinese bedroom manufacturers, more orders
for bedroom furniture have come to Malaysia.
"I have been getting more orders from these customers.
Some are forecasting a 40 per cent increase in turnover
in 2005 because of the increase in bedroom sets."
In
the same manner, LIMAHSOON expects annual turnover to reach
RM60 million in 2005, from a projected RM48 million in 2004.
In addition to the higher sales of its laminated boards,
the upsurge in turnover is likely to be fuelled its up the
company's new products - the sale of wood chips and three-ply
laminated scantling.
The latter is still in the R&D and promotion stages.
The plan is to use exotic and good quality timber and will
be sold at premium prices to European countries, especially
Germany.
National Starch & Chemical Company, LIMAHSOON's existing
adhesive supplier, is actively involved in this project
with its technical input. Switzerland-based Purbond AG is
also assisting in the fulfilment of European markets' requirements
"If this goes through, I foresee significant increase
in the company's turnover because this product has immense
potential. And because the production process is almost
similar, we don't even have to invest in new factories or
machinery. We will capitalise on our laminating technology
and expertise"
The sale of wood chips to MDF and particleboard makers
in Malaysia will also be lucrative, said Mr Lim, especially
considering these were once waste and "extras"
from its sawmills. Already in operation, it is expected
to contribute some RMI million a year to the company's coffers.
Mr Lim acknowledged that to maintain its current growth
trend, the company is ready to meet new challenges. But
he added that the transformation will be done in a controlled
and systematic manner that would create value for the company's
future.
back
