Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on October 31, 2018

KUALA LUMPUR: South Korea-listed Coway Co Ltd, whose net profit and revenue are set to hit fresh record highs for the financial year ending Dec 31, 2018 (FY18), will ramp up investments for its Malaysian operations, which may include establishing a manufacturing facility and an initial public offering (IPO).

According to its director of global direct sales business division James Park Jae Young, setting up a plant in Malaysia is still on Coway’s radar as the country remains the largest overseas market for the group and is Coway’s springboard into new markets in Southeast Asia.

“Setting up a manufacturing plant in Malaysia is a logical move in the long term and we are still considering it. Maybe we’re able to announce our decision in one or two years,” he told Malaysian journalists in Seoul last week. Currently, the group operates three manufacturing plants in South Korea and one in China.

He added that the plan for its first factory in Malaysia would likely happen before an IPO on Bursa Malaysia, which Park said could take place within two to three years.

According to Coway chief executive officer Lee Hae-sun, Malaysia remains the largest overseas market for the group, contributing 15% of total revenue, followed by the US. Coway’s products are sold in about 50 countries.

He said the group is expected to reach one million customers in Malaysia by year end, putting it on track to surpass its annual revenue target of RM1.1 billion for 2018.

Last year, Coway (M) Sdn Bhd’s (Coway Malaysia) revenue rose 54.9% to RM790 million from RM510 million in 2016. It sold 295,000 units last year, up 39.8% from 211,000 units in 2016.

Group-wide, Lee is confident that Coway will deliver record profit and revenue this year. It recorded 280.4 billion won (RM1.05 billion) in net profit for the first nine months ended Sept 30, 2018 (9MFY18) compared with 326.08 billion won for FY17. Its revenue amounted to two trillion won for 9MFY18, compared with 2.52 trillion won for FY17.

“We have been setting a new record every year, and this year we expect another record as a pioneer in water and air purifiers in South Korea. We are also the pioneer in the rental scheme in South Korea,” said Lee concerning Coway’s sustainable growth.

Sales from Coway’s rental service contributed about 85% of its total sales, and the rest from direct sales of its appliances such as water and air purifiers, bidets and mattresses.

Lee said Coway’s strong performance includes a 5% to 10% organic growth through innovations of existing products, and another 5% growth through expanding into other products with its partners.

Lee also said the group will be aggressively expanding its overseas market base as the domestic market is saturated. “We are growing our global sales more than 30% every year, and contribution from [our] Malaysian operations has been very good. We see contributions from overseas markets increasing faster compared with [that from the] domestic market [going forward],” he added.

Park, previously Coway Malaysia’s managing director from 2006 to 2014, said from Malaysia, its main hub for Southeast Asia, Coway has expanded into Thailand and is looking to expand into Indonesia and Vietnam next year.

Coway advanced into Malaysia in 2006 with water purifiers. Today, it has a 34% share of the water purifier market. It has also made inroads into the local air purifier market, without providing a figure.

Coway Malaysia head of communication division Ryan Jung Tae Seung said the group will be launching a new water purifier designed specifically for the Malaysian market on Nov 7. Dubbed “Ombak”, Coway targets to sell 1,000 units per month.

“We will run a massive marketing campaign [for ‘Ombak’] starting this month,” Jung said, adding that Coway is expecting RM15 million in media value via its promotional efforts on television, radio and digital. The leading water and air purifier maker in South Korea invested RM360 million into its Malaysian operations last year.

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