GEORGE TOWN: Penang-based dining set furniture manufacturer and exporter Eurospan Holdings Bhd, which is facing intense competition in its traditional markets like the United Kingdom and Australia, is striking out into new markets, namely China, North Africa and Indonesia.

These new target markets are expected to generate a 30% rise in revenue, chairman Guan Kok Beng told The Edge Financial Daily recently.

Eurospan, which produces only export-based products, is also looking to forge more partnerships with foreign counterparts.

“We have about 10 partnerships with medium- to high-end furniture companies in Japan, Singapore, the Czech Republic, Holland and Thailand. We hope to forge more partnerships, particularly in China.

“We are working hard to supply to this huge market but it takes time to build business relationships, as working with the Chinese is different. They operate differently from most international markets,” he said after the group’s annual general meeting.

Targeting North Africa is a result of the capital shift from Europe due to the economic slowdown there, he said.

“Thus, it is an emerging market for us. We currently have partnerships in Morocco and Algeria.

“In Indonesia, we are only interested in the upper-end furniture market. The republic is also largely involved in the furniture market, but mainly in the lower-end sector. [So] to us, it is an emerging market as its economy is stable,” he said.

According to its annual report for the financial year ended May 31, 2014 (FY14), the group recorded a net profit of RM5.6 million, up 75% from FY13’s RM3.2 million, with a revenue of RM65.2 million, which improved 7% from FY13’s RM60.9 million.

The earnings improvement is largely due to a more favourable exchange rate of the dollar against the ringgit, said Guan.

However, the group registered a significantly lower profit in the first quarter ended Aug 31, 2014 (1QFY15), which stood at RM372,000 against the 1QFY14’s RM1.56 million. Revenue for the period also dropped 11.44% to RM15.16 million compared with 1QFY14’s RM17.12 million.

Guan said this was a result of weak currencies related to the Japanese yen and Russian rouble, which caused a drop in purchases. To counter the drop, he said, its products are being diversified to include dining sets for the commercial furniture market, which is a shift from its present focus on home furniture.

Meanwhile, the group, which was founded in 1972 and was listed in Bursa Malaysia’s second board in 2000, will continue servicing the North and South American, European and Asian markets. The three markets contributed about 90% of Eurospan’s revenue growth in FY14.

“The Americas is a continuously growing market. There is a lot of potential there but we just have to keep looking for new ventures that are stable. We will not be looking to work with huge players such as Ikea and Walmart,” he said.

They are big furniture chains and Guan noted that it would not be prudent to over-rely on them as Eurospan could be easily impacted by any changes in its arrangement with them.

“Instead, we want to focus on companies that are small- and medium-sized to ensure a long-term relationship,” he said, adding that Eurospan’s furniture are made solely of beech wood imported from Germany.

This article first appeared in The Edge Financial Daily, on December 15, 2014.