Concrete firm upbeat after ending big losses
The management team at SET-listed General Engineering Plc is turning around the concrete materials maker after years of losses, says chief executive Thitipong Tangpoonphonvivat.
“We want everyone to believe that we are committed to improving the company’s performance and making an effort to improve the company’s potential to grow in the future,” he said. “Past management may have disappointed the shareholders, but we won’t.”
He acknowledged that his team faced an uphill climb in making top-down changes to the company.
While the poor past reputation of the firm, formerly known as GEN, had put the new team on the market regulator’s watch list, the situation got better after the company succeeded in refinancing long-term loans from Bangkok Bank and Krungthai Bank.
The company, now doing business as GEL, has been a non-performing stock over the past decade. In 2012, Mr Thitipong and his allies became the latest group to take on the challenge of reviving the 50-year-old firm.
The new team began by shifting business lines from their previous focus — underground work such as pre-stressed concrete pilings — to civil engineering jobs and concrete/cement materials for the entire building structure.
After many years of losses, GEL in 2012 turned a 159.32-million-baht profit, which rose to 258.63 million in 2013 and 139.05 million in the first six months of this year.
“Our performance has proved that we handled things the right way,” Mr Thitipong said.
GEL in 2013 reported sales revenue of 1.6 billion baht, up from the more typical 800 million during the old management’s tenure. The company forecasts 2 billion baht in revenue this year and 2.5 billion in 2015.
“We expect 30% annual growth with the turnaround, and once the revenue base is larger, we hope for 10-20% a year,” Mr Thitipong said.
Apart from the change in business strategy, investment in new capacity is a must.
GEL is awaiting completion of a new factory in next year’s second quarter to meet a yearly goal of 1 million tonnes of concrete products, up from 210,000 tonnes.
Another piece of the puzzle is complementing the core business with a 30% share held in McTric Co, a mechanism and engineering service provider that jigsaws GEL’s construction solutions.
The company also holds a 19.4% stake in Millcon Steel Plc, which makes steel pipes, deformed bars and other types of long-shape steel for construction.
“Not only related businesses that we need, but also strategic partners,” Mr Thitipong said. “We have a venture with Millcon to tap growing opportunities in Myanmar. Our investment in Myanmar shows that we are committed to company growth.”
The investment mix was redone after the old portfolio invested in unrelated businesses.
“We don’t have huge capital to enter
into a strong company, so we decided to pick the weak one, but we still have the potential to grow in the right hands,” Mr Thitipong said.
“This year we hope that we can pay a dividend to shareholders for the first time in a decade. Also, the employees have the potential for an increase in salary and benefits from their hard work for the first time in many years.”
Mr Thitipong and his allies have gained a 35-40% stake in GEL, with an additional 10% held by trusted partners, but the young chief executive may seek a further share to ensure that management keeps control of the company.
He said GEL hoped to be No.1 in concrete building materials within five years. The plan is to move from commodity parts to specialised products that generate better margins.
“We believe that we’ve come up with the right business model that will help us reach our goals,” Mr Thitipong said.
Shares of GEL closed yesterday on the SET at 0.80 baht, unchanged, in trade worth 75 million baht.