Uncover this at their listed company’s site. I think it will share some insights to this little company to see if they will be able to navigate this tough times well:
Q. During 1Q09, the CMA business quadrupled to S$3.5 million, to represent nearly 30% of Group sales. Is the CMA business expected to surpass the semiconductor tooling business?
A. When we started the CMA division several years ago, our goal was to create a significant business unit that would both leverage and complement our core semiconductor tooling division. With the commencement of our CMA-related manufacturing plant in the USA on 31 May 2008 following our S$2.5 million acquisition of substantially all the assets of California-based AMP3, our CMA division has grown from less than 10% to nearly 30% of Group revenue. We see exciting long-term growth opportunities for both these businesses and aim to continue building our operational capabilities to grow both our divisions.
Q. What benefits has MM enjoyed from the AMP3 acquisition?
A. We are very excited about the steps we are taking to build our CMA business. While our new plant in the USA is not yet profitable and exerted some drag on the performance of our GP margin and net profit during 1Q09, we believe it would have cost considerably more and taken many years to develop if we had started the plant from scratch. By acquiring AMP3’s assets, we have brought in a great team of 45 people with valuable skills and know-how, as well as gained immediate access to new customers in aerospace, medical and instrumentation that could otherwise have involved lengthy marketing and qualification periods. In addition, this modest S$2.5 million acquisition is giving us an opportunity to learn and evaluate this way of enhancing the Group’s growth.
Q. What is the current technology trend for the semiconductor tooling industry? How has the Group exploited the current trend to their advantage?
A. Although initially drawn to Asia as a place for low-cost manufacturing, chip manufacturers have since made Asia a center for not only ‘backend’ manufacturing but also ‘frontend’ wafer-fabrication processing. With our existing plants in Singapore, Malaysia, China, Thailand and the Philippines, and direct sales personnel in Taiwan, Korea and Indonesia, we are in a strong position to benefit from this industry trend towards relocation to Asia, particularly China which has become our largest and fastest-growing market for semiconductor tools.
With over half of all semiconductor chips finding their way into consumer applications, there has been an acceleration in the trend towards miniaturization. To capitalize on this, the Group has developed several new tools with feature sizes below 0.10mm which is one definition of ‘nano-technology.’ One such tool, for example, is used to assemble a hearing aid that uses a ‘MEMS’ chip.
Q. During Q109, semiconductor tooling revenue was down about 5% from the previous year. What is the Group’s growth strategy for this business segment?
A. We intend to continue implementing strategies that will maintain MM’s strong competitive position in the semiconductor tooling business. Our long-term product strategy is to continue widening our range of consumable tools and parts to offer our semiconductor customers with a “one-stop” solution for all their requirements. To this end, we have developed several new tools with feature sizes below 0.10mm to capitalize on the semiconductor industry’s trend towards miniaturization,. Our wide-reaching direct presence in Asia and offices in Switzerland and the USA also position us to provide our global customers with fast and effective local support.
To help diversify the Group’s revenue from the cyclicality of the semiconductor industry, we also intend to continue building our CMA business to explore opportunities in other high-tech industries. In 1Q09, our CMA business quadrupled to account for almost 30% of Group sales.
Q. In the face of the current global economic downturn, what new measures will MM be adopting in terms of cost control?
A. With the increasing likelihood of a global economic recession, we think it is essential to implement consistent and practical growth strategies that are based on our core competencies and competitive strengths.
In the near term, we have taken steps to minimize our credit risk. We are performing credit evaluations on all customers who require credit above a certain quantum and are reviewing all outstanding monies on an ongoing basis. This enabled us to reduce our trade receivables that were outstanding for more than 90 days to just 0.9% of sales in 1Q09, compared to 2.2% at the end of 1Q08.
We will also be keeping a close watch on our overhead expenses. In 1Q09, these expenses increased 7.5% to S$2.9 million. As a percentage of total sales however, our overhead expenses declined to 25.0% in 1Q09, from 28.5% in 1Q08. Our aim will be to continually work to reduce these costs as a percentage of total sales. We also intend to keep our total headcount steady and defer some previously-planned capital spending.
Q. Analysts are expecting MM’s revenue to fall in the next 3 quarters. Do you hold a similar view?
A. We do not have the practice of providing specific financial forecasts. While the outlook for FY2009 is challenging, our main goal for FY2009 will be to improve the gross profit margin of our CMA business by working to bring our new manufacturing operations in the USA to profitability.
With 574 great people and a balance sheet that includes S$23 million in cash and receivables, less than S$1 million in trade payables and no borrowings, we remain cautiously optimistic and feel ready to make the most of the challenges and opportunities that come our way.