Board helping out: Ameer says Mydin’s directors will be taking a 100% pay cut for six months.
SMALL businesses are among the hardest hit under the movement control order (MCO). With limited reserves, many were unprepared to face the sudden decree to stop operations for a period of over a month.
The government announced several efforts under the Prihatin SME+ stimulus package early this week as a stop-gap measure to help prop up the SMEs during this period of little to no activity.
While these measures offer SMEs some help, entrepreneurs cannot solely rely on government handouts to tide them through the MCO and brace themselves for the recession.
The current times test their resilience and resourcefulness as employers tap every available channel and maximise any capacity to stay afloat while remaining forward-looking.
Following the Prime Minister’s announcement, IGL Coatings managing director Keong Chun Chieh immediately called up every bank in town to enquire about the Covid-19 Special Relief Facility.
While the coatings manufacturer is in a slightly better place than most companies with reserves to last a quarter, Keong says there is a need to shore up for a slow market post-MCO.
IGL will ramp up R&D into virus eliminating coatings to return to higher margin products, says Keong.
“If we can secure banking facilities, this will prepare us for the future so that we will have cashflow to invest. Right now, I’m focused on three main things: production, export and research and development (R&D).
“For production, we are trying to max out our capacity to produce whatever product we can that will sell in the current market. And for R&D, we are scrapping all the product developments we were doing before this and focusing our efforts on virus eliminating coatings so that we can go back to our high-margin coating products, ” he says.
Diversifying products
If there is one thing manufacturers are doing to ensure minimal income still comes in during the MCO, it is by diversifying their product offering and sales channel.
IGL started developing a plant-based disinfectant in January when Keong noted the explosion of Covid-19 cases in China back then. It also obtained approval to operate an e-commerce company to sell its new products online.
Tackling the problem: Koh will discuss adjustments with employees to weather the storm.
“We managed to get approval to restart operations during MCO quite early. So the disinfectant is taking up almost 100% of our production capacity now. But the supply chain is a headache because supporting businesses are not allowed to operate.
“It’s been hard to source for materials. So we are getting them from whichever source is available, including getting them online even if the cost is higher.
“And because the shift was so sudden, we did not have the proper machines to cater to this new product. And we don’t have full manpower so it is hard to produce as much also, ” says Keong.
Revenue has come down significantly as IGL switched from its regular coatings product, which is a high-value product, to the current one, which is high-volume but low-margin.
“But in the short-term, we are just hoping to breakeven, enough to pay our salaries and what we need.”
But Keong is eyeing market trends as the disinfectant may open up new opportunities if demand remains post-Covid-19.
He says this has indeed been a lesson of diversification.
Likewise, coloured contact lenses firm Maxvue Vision Sdn Bhd has turned to a more in-demand product like face masks to keep things going for the time being.
“We are looking at other areas that we can go into that can still help pay our bills, like selling other medical supplies. Because we have a medical device licence so that helps. We will submit the papers to import and sell. Who knows, this could grow into another division for us.
“But the problem is the higher cost of shipment. Courier cost has more than doubled. And the US dollar has gone up tremendously. So it’s also expensive to import, ” shares founder Selvam Kanniah.
Selvam says the company will not be cutting its full-time workers at the moment as it is already running on a very lean team. Additionally, many of its operations have been outsourced to reduce cost.
He worries about developments in Europe as that is the company’s biggest market at the moment. To tide over, Maxvue is looking at various ways to supply its contact lenses to online retailers locally and abroad to widen its distribution channel.
Adjustments on the cards
Given the unprecedented disruption to businesses, making some adjustments is necessary for survival as companies try their level best to retain their staff.
Although GT Spice Manufacturers Sdn Bhd director Calvin Koh is looking to tap government loans and resources, he says it is also looking at steps that can be taken to further reduce production cost.
“We are already operating with minimal workforce so we won’t be retrenching our workers. But we have to discuss with our employees on how we can share the burden and try to weather the storm with our employees, ” says Koh.
If the MCO does not get extended for too long, Koh is hopeful that its production will be able to recover within six months after the MCO. However, this is also dependent on how much time it takes for consumer confidence to return.
As for cleaning products maker The Truly Loving Company Sdn Bhd (TLC), chief executive officer Julia Chong says it will reduce items on the profit and loss account that can be deferred in order to sustain the business and cashflow. And among these items will be advertising and promotions.
“The TLC team is a small and dedicated team. We will not be reducing the workforce as we have a lean team and we will continue to pay their salaries.
“A number of our sales employees are two-income families, with their spouses operating food stalls, van retailing and being Grab drivers. All these activities are now closed and will continue to be challenged going forward. We cannot think of cutting salaries when they are already losing their sales commissions and incentives with no sales income and their take-home pay is badly affected.
“TLC has a vision and business purpose and we are committed to it. Our philosophy is ‘This too shall pass’ and this is another road bump, albeit a huge one, on TLC’s journey, ” says Chong.
Even for bigger players like Mydin, making adjustments to ensure sustainability is crucial as the chain of hypermarkets sees a drop in sales. Mydin owner Datuk Wira Ameer Ali Mydin notes that the chain has high overheads given its large number of workers and real estate commitments. And while Mydin will not be charging its tenants rent during the MCO, it still has to meet its rental obligations to its landlords.
Ameer says Mydin’s directors will be taking a 100% pay cut for six months to ensure cash is funnelled to the business.
They will also be looking into plans to delay a percentage of salary payments to each staff in the short term. Ameer emphasises that it is important that the company does not cut employees’ salaries for the MCO duration as they have their own financial obligations to meet.
“For example, maybe I pay you half first, and the other half you take it as we are putting it in the bank for you and we will pay you back this remainder in installments maybe over a period of one year.
“So that helps with my cashflow now but at the end of the day, you get back the full amount that is due to you, ” he says.
