By YEOW POOI LING
JOHOR BARU: Second board-listed Axis Inc Bhd sees growing sales on the back of capacity expansion and wider customer base, said executive director Jimmy Koh Tee Jin.
The company is a semi-integrated textile and garments manufacturer. Its knitting and dyeing facilities are located in Johor while garment manufacturing is contracted to two factories in Cambodia and another in Vietnam.
Axis plans to spend between RM33mil and RM35mil in the next two years for capital expenditure (capex) to be funded via the capital market or bank borrowings.
“We have identified a piece of land in Johor Baru for our new knitting plant. We’re almost out of space at our knitting factory in Tangkak. We have to move if we want to increase our capacity and storage space,” he told StarBiz during a recent plant visit.
Koh said the shift to a bigger plant and closer to its dyeing factory would save as much as RM1mil a year on transportation costs.
Currently, the knitting factory is running at 100% capacity of 1.5 million pounds of fabric per month with 78 knitting machines.
Axis intends to boost that to two million pounds a month by adding 30 machines.
To control raw material costs, the company had a hedging mechanism in place for the purchase of yarns, which comprised more than half of operating costs, Koh said.
All the output from the knitting factory is consumed internally for the dyeing operations.
Given the increase in knitting production, Axis planned to install six new dye tanks to boost dyeing capacity by a further 10% to two million pounds of fabric a month, he said.
Two years ago, the company replaced dyeing tanks that were more than 10 years old due to their declining efficiencies.
“These old tanks use more water and require more power to run. It’s better to replace them,” Koh said, adding that utility costs comprised about 10% of operating costs.
The company also converted to natural gas from diesel at end-2005 as it managed to lock in the costs of natural gas with Petroliam Nasional Bhd. The move enabled Axis to save about RM250,000 a month.
As it aimed to cut cost by 30% within 12 months, it would pursue strategies in logistics management, fabric consumption, efficiency and productivity improvement, and production down-time savings via larger consistent orders in hand, Koh said.
As the company was building on dual production capability in knitted and woven garments, he said, it would put in the necessary infrastructure as well as retrain staff this year.
About 30% of fabrics produced at the dyeing factory are used for Axis’ garment manufacturing and the rest exported to other textile manufacturers.
“Our factories in Cambodia and Vietnam also import fabrics from Hong Kong, Taiwan and China as we do not produce all types of fabric that meet their requirement,” Koh said.
The plants in Cambodia and Vietnam have a combined capacity of 200,000 dozen per month with 7,000 workers and 4,200 sewing machines.
Axis does not own the foreign factories but has partnered local parties, as it requires less capex and reduces cross-border investment risks.
Koh said Axis supplied the machines and equipment as well as sourcing of materials while the foreign partners owned the land and factories.
It was also eyeing Indonesia and Myanmar to extend its contract garment manufacturing to take advantage of the cost efficiencies in these countries, he added.
Meanwhile, Axis planned to ramp the Cambodian and Vietnamese factories’ annual capacity to 250,000 dozen by year-end as well as install garment silkscreen printing machines at the factories, he said.
“We want to move up the value chain by playing on printing, embroidery and washing as they provide higher margins. Fabric design is also more complicated and with that we can ask for better margins,” Koh said, adding that Axis had to keep up with new technology in knitting, dyeing, sewing, silkscreen printing and embroidery to meet buyers’ requirements.
In terms of clientele, it has diversified its base in the past five years. In 2002, 70% to 80% of garment manufacturing output were attributed to GAP Inc but this had dropped to 10% now, Koh said, adding that other clients included Footlocker USA, Le Coq Sportif, NEXT and ECKO.
“We want to avoid concentration risk. We also try to reduce dependence on products with low margins,” he said.
Currently, the US clients comprise 70% of sales and Europe the balance.
“We hope to achieve a ratio of 60:40 in the next 12 to 24 months. The widening clientele base will boost annual sales by 15%,” Koh added.
On whether Axis would consider setting up a yarn factory in the future, he said it would only be “worthwhile” to do so if the company required six million pounds of fabric a month as the cost of a sizeable yarn plant was about US$100mil.
Axis hopes to transfer to the main board of Bursa Malaysia this year to gain higher exposure to institutional investors.
“We’ve already submitted an application to the exchange,” Koh added.
JOHOR BARU: Second board-listed Axis Inc Bhd sees growing sales on the back of capacity expansion and wider customer base, said executive director Jimmy Koh Tee Jin.
The company is a semi-integrated textile and garments manufacturer. Its knitting and dyeing facilities are located in Johor while garment manufacturing is contracted to two factories in Cambodia and another in Vietnam.
Axis plans to spend between RM33mil and RM35mil in the next two years for capital expenditure (capex) to be funded via the capital market or bank borrowings.
“We have identified a piece of land in Johor Baru for our new knitting plant. We’re almost out of space at our knitting factory in Tangkak. We have to move if we want to increase our capacity and storage space,” he told StarBiz during a recent plant visit.
Koh said the shift to a bigger plant and closer to its dyeing factory would save as much as RM1mil a year on transportation costs.
Currently, the knitting factory is running at 100% capacity of 1.5 million pounds of fabric per month with 78 knitting machines.
Axis intends to boost that to two million pounds a month by adding 30 machines.
To control raw material costs, the company had a hedging mechanism in place for the purchase of yarns, which comprised more than half of operating costs, Koh said.
All the output from the knitting factory is consumed internally for the dyeing operations.
Given the increase in knitting production, Axis planned to install six new dye tanks to boost dyeing capacity by a further 10% to two million pounds of fabric a month, he said.
Two years ago, the company replaced dyeing tanks that were more than 10 years old due to their declining efficiencies.
“These old tanks use more water and require more power to run. It’s better to replace them,” Koh said, adding that utility costs comprised about 10% of operating costs.
The company also converted to natural gas from diesel at end-2005 as it managed to lock in the costs of natural gas with Petroliam Nasional Bhd. The move enabled Axis to save about RM250,000 a month.
As it aimed to cut cost by 30% within 12 months, it would pursue strategies in logistics management, fabric consumption, efficiency and productivity improvement, and production down-time savings via larger consistent orders in hand, Koh said.
As the company was building on dual production capability in knitted and woven garments, he said, it would put in the necessary infrastructure as well as retrain staff this year.
About 30% of fabrics produced at the dyeing factory are used for Axis’ garment manufacturing and the rest exported to other textile manufacturers.
“Our factories in Cambodia and Vietnam also import fabrics from Hong Kong, Taiwan and China as we do not produce all types of fabric that meet their requirement,” Koh said.
The plants in Cambodia and Vietnam have a combined capacity of 200,000 dozen per month with 7,000 workers and 4,200 sewing machines.
Axis does not own the foreign factories but has partnered local parties, as it requires less capex and reduces cross-border investment risks.
Koh said Axis supplied the machines and equipment as well as sourcing of materials while the foreign partners owned the land and factories.
It was also eyeing Indonesia and Myanmar to extend its contract garment manufacturing to take advantage of the cost efficiencies in these countries, he added.
Meanwhile, Axis planned to ramp the Cambodian and Vietnamese factories’ annual capacity to 250,000 dozen by year-end as well as install garment silkscreen printing machines at the factories, he said.
“We want to move up the value chain by playing on printing, embroidery and washing as they provide higher margins. Fabric design is also more complicated and with that we can ask for better margins,” Koh said, adding that Axis had to keep up with new technology in knitting, dyeing, sewing, silkscreen printing and embroidery to meet buyers’ requirements.
In terms of clientele, it has diversified its base in the past five years. In 2002, 70% to 80% of garment manufacturing output were attributed to GAP Inc but this had dropped to 10% now, Koh said, adding that other clients included Footlocker USA, Le Coq Sportif, NEXT and ECKO.
“We want to avoid concentration risk. We also try to reduce dependence on products with low margins,” he said.
Currently, the US clients comprise 70% of sales and Europe the balance.
“We hope to achieve a ratio of 60:40 in the next 12 to 24 months. The widening clientele base will boost annual sales by 15%,” Koh added.
On whether Axis would consider setting up a yarn factory in the future, he said it would only be “worthwhile” to do so if the company required six million pounds of fabric a month as the cost of a sizeable yarn plant was about US$100mil.
Axis hopes to transfer to the main board of Bursa Malaysia this year to gain higher exposure to institutional investors.
“We’ve already submitted an application to the exchange,” Koh added.
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