By: Steve Toloken
June 11, 2014
Singapore-based plastics molder and toolmaker Sunningdale Tech Ltd. is setting up an operation in Brazil, part of a series of restructurings designed to cope with challenging business conditions and rising costs in its manufacturing bases in China and Malaysia.
The publicly listed firm did not give details of the Brazilian investment but said in its first quarter earnings report that it expected the facility to start in the production in the third quarter. Sunningdale Tech Plásticos (Brasil) Ltda. would be its first in the country and second in the Americas, after a Mexican plant.
Sunningdale disclosed several initiatives designed to reduce costs, including consolidating operations in Sweden to new facilities in Latvia this quarter, and looking for growth from a “low-manufacturing-cost” factory it opened last year in the Indonesian free trade zone of Batam, near Singapore.
“The operating environment remains competitive and challenging,” the company said. “The minimum wage increase and slow growth in China, pricing pressures from our customers and [the] high increase in Malaysia utility rates … continue to squeeze margins.”
The company, which is traded on the Singapore stock market, reported first quarter sales of S$105.6 million (US$84.5 million), down 4 percent from the same period last year. Profit rose from S$2.3 million (US$1.8 million) in the first quarter 2013 to S$8.4 million (US$6.7 million) this year, but most of that seemed to be a one-time gain from selling property.
“While there are some signs of economic recovery particularly in the U.S., many uncertainties remain,” said Chairman Koh Boon Hwee, in a statement. “In the meantime, there is no doubt that costs in many emerging markets, where our plants are located, are continuing to rise.”
The company noted that Chinese factory wages last year rose 15-20 percent, along with a “significant” increase in the minimum wage in Malaysia and rising costs for foreign workers in Singapore.
Overall, the company said it was focused on productivity improvements, reducing costs and trying to diversify beyond its traditional focus on manufacturing in China, Malaysia and Singapore. It employs 7,000 around the world.
Business from automotive, consumer products and healthcare customers remained stable, it said, although it suggested conditions were tougher in China.
“Filling up our southern China facility capacity remains our top priority,” it said. “All other facilities remain busy with healthy orders… The group continues to receive enquiries for new businesses.”
It noted that the Batam, Indonesia factory opened to serve a global consumer electronics manufacturer it developed as a new customer in 2012: “Many other [multi-national corporations] operate in Batam, and we are confident of developing new customers in the future.”