MANY Malaysian companies see China as a land of vast opportunities and potential; Hytex Integrated Bhd is one of them.
The garment manufacturer's China project, Hytex Integrated (Suzhou) Ltd, a fully integrated textile and apparel factory is expected to start operations by the third quarter of 2004.
Hytex managing director Saw Kim Hock said the plant would cater to the company's export business of contract manufacturing/original equipment manufacturing (OEM) for customers like Nike and Puma.
“Nike is very happy with the setting up of our Chinese plant as it is still sourcing for good suppliers due to high demand. Currently, 25% to 30% of our revenue comes from Nike,” he told Starbiz.
Saw said the company in Malaysia was already producing its maximum capacity of 600,000 pieces of apparel and was unable to accept orders from its customers like Nike, which had nine months to a year's pre-book order.
Its Cambodia plant, which has a production capacity of some 200,000 pieces, is also fully utilised, mainly contract manufacturing for Puma, export to Europe and the manufacturing of Hytex's own in-house brands.
“That is why we are expanding to China. The textile industry is also very labour intensive and China would be able to provide lower labour cost unlike here where we have to rely on foreign workers,” he said.
Saw seems confident that by 2007, the company would be able to move all its production to China, with Malaysia concentrating on research and development.
The plant, which has a land size of 21 acres with a 24,000-sq m single-storey factory, two-storey office and four-storey hostel, is 50km from Shanghai, in the Shaxi industrial development zone situated in the centre of Taicang City, Jiangsu Province.
It is also located near the Nike (Suzhou) Sports Co Ltd (America) in Taicang City and will have a production capacity of about 300,000 pieces of apparel a year.
“Investment in the plant would be in stages. We have started with an initial investment of about RM20mil for land and building, machine and equipment, but actual investment is expected to total RM50mil within two years,” Saw said.
He expects contribution from the China operations to be gradual and forecasts 15% to 20% contribution to revenue in the first year of operations.
According to Saw, Hytex also plans to tap China's retail market.
“One of the conditions of doing retail business in China is that we must have our own manufacturing base. As we have fulfilled this criterion, once we are established in China, in may be one or two years, we would go into the retail market.
“Of course there will be much competition in the Chinese market but I think the opportunity would be huge as Shanghai alone has the population of Malaysia,” Saw said.
He added that the company had a niche market in manufactured branded products and was not competing head-on with the cheaper products.
Saw said Hytex would also be setting up a chain store called World of Babies, a complete baby specialty shop, which would include third-party products.
“We will be opening our flagship store of about 10,000 sq ft in Ikano Power Center next to Ikea in Mutiara Damansara before Christmas. This will be part of Hytex Town, our 29,000-sq ft mix concept store which will consist of our own brands like World of Cartoons, American Athletics and Issue,” he said, adding that the company's investment in Hytex Town was close to RM3mil.
Saw said the company planned to have five World of Babies stores by the financial year ending March 31, 2004, and expects the chain to contribute 6% to 8% to retail revenue (domestic) for next year.
“The baby market is evergreen. It is very stable as there will always be newborns and people nowadays are very willing to spend on children. This is a growth area for the company, which has baby products like Tenderly, World of Cartoons and Pooh Baby but not a baby shop,” he said.
Saw said Hytex was also very aggressively penetrating east Malaysia and had appointed a distributor to market all the company's own brands for babies, children and adults in department stores.
“We started last month and have opened up 20 to 30 counters in various department stores there,” he said, adding that the company currently had 47 boutiques and 300 consignment outlets/counters in department stores in the country.
Hytex recorded a pre-tax profit of RM10.6mil on revenue of RM113.8mil for the year ended March 31, 2003.