Dynaplast seeks to become a leader in Asia-Pacific
Established in 1959, plastic packaging company PT Dynaplast is now the country's largest packaging player in the country with 40 percent market share. With 14 production centers in Indonesia and Thailand, and plans to build another in Vietnam, the company is now gearing up to become a leading player in the regional packaging industry. Dynaplast chief executive officer Tony T. Hambali shared his views with The Jakarta Post's Rendi A. Witular in a recent interview on the company's expansion plan to engage in the regional market. The following is an excerpt of the interview:
How is your sales this year?
Our sales this year will reach around Rp 600 billion (US$70.5 million), up from Rp 446 billion last year. The sharp climb is because at the end of October we decided to increase our ownership in plastic company Berli Prospack Co. Ltd., our joint-venture subsidiary with Berli Jucker Public Co. Ltd in Thailand, to 51 percent from 49 percent.
By holding a majority ownership in the company, we can consolidate the firm's financial report into ours at the end of the year. The legal process on the consolidation is scheduled to be completed later this month, enabling us to rename the company Berli Dynaplast Co. Ltd.
As you know, we spent US$220,000 of our cash reserves in order to increase our stake by 2 percent in the company.
Why are you interested in taking control of the company?
Because our mission is to become the preferred packaging company in the Asia Pacific. We can expand our business easier in the region by owning a majority share in Berli Prospack.
We hope that by partnering with Berli Jucker, a subsidiary of Thailand conglomerate TCC Group, we can enlarge the business of Berli Prospack by 300 percent in the next three years.
For expansion, we have decided not to inject further fresh capital into the company. Berli Prospack will use its own cash and bank borrowings to finance the expansion. The company has no plan yet to go public in Thailand because it still has the ability to borrow from banks. We consider Berli Prospack a relatively small company, which still needs expansion.
By taking control of the company, we are now concentrating our business not only in Indonesia but also in Thailand, and possibly in other country in the region.
What countries are you eying right now for further expansion in the region?
We are seeking possibilities of investing in China and Vietnam. But the latter is the most possible choice right now.
We are hoping to start our investment in Vietnam possibly as soon as next year, but under the condition that we have already cleared an adequate order first from our clients. Operating in a foreign country is not easy, we have to get a minimum order of between $3 million and $4 million for our business in Vietnam to be run economically. We are currently still working it out.
In Vietnam, we are planning to set up a new plant, not an acquisition like what we have done in Thailand. For the first phase, we plan to spend around $5 million building the plant.
Vietnam still has a high tariff protection. Because of that, for the time being all goods produced in that country will be sold on its domestic market and its neighboring countries, such as Cambodia and Laos. The three countries have a total of around 200 million people, which is a very big market.
We are also optimistic to do business in Vietnam, because its plastic industry is still lagging behind in technology. This is another advantage and opportunity for us to offer the market with better products.
Operating in Vietnam for a start is not expensive, because it offers a tax holiday of between two and four years to foreign investors.
What is your plan and target for 2004?
We are still consistent to target 20 percent growth next year. But we realize that it is not easy to achieve the target. Apart from the fear of possible unrest during the general election, there is actually another grave problem for businesses next year; that is the continuing increase in operational expenses such as for labor, electricity and fuel.
As for raw material price, we estimate that it will be stable next year because there are new producers coming into the market. Thus, there will be an increase of stock in the market, which in turn will help stabilize the price.
We have several projects that are already in the pipeline for 2004.
In the first quarter of next year, we expect to conclude the establishment of our mold center, in order for us to make molds faster and better. We have allocated around Rp 15 billion for the project.
We also plan to set up a new production facility called Dynaplast No. 7 to accommodate the production facility of one of our clients. For the first phase of its establishment, the plant will cost us around Rp 40 billion.