››  Annual Reports     ››  News Releases     ››  Announcements     ››  Audited Account     ››  Circular     ››  IR Contact      
News Releases
Strategies for a Downturn
by Errol Oh from The Star Online
Kuan: Difficult to cut spending unless you can switch to cheaper alternatives
GIVEN the behaviour of the stock markets and the economies of the world these days, should we head for the hills, brace ourselves, dig in, batten down the hatches, tighten our belts, gird our loins, hunker down, assume the foetal position or do all of the above?
The last option is the safest thing to do, but in business, the safest is not necessarily the best. Merely weathering the storm may not be enough.
That is easier said than done, of course. It takes a lot to be forward-looking and aggressive when sales are shrinking, costs are increasingly burdensome and the uncertainties turn even the best-laid plan topsy-turvy.

In fact, some people are convinced that the companies that are the most positive during the tough times will fare better in the long run. The argument is that these corporations will be in a better position to react once the economic pendulum begins its upswing.

Whatever the outlook and attitude, entrepreneurs and top executives will need to be at their best when deciding the strategies and directions for the rough weather ahead. In an economic downturn, the margin of error is thinner and markets will be harsher in punishing mistakes.
There are no easy decisions. Some may only appear to be no-brainers. Cost cutting, for example, will be a universal trend. However, the best managers know that it is perilous to just slash expenditure across the board. Pulling back funds from critical areas can cripple a business.
Deferring projects for fear of weakening demand and higher costs may seem entirely logical, but what do you do about cash flow and earnings growth in the interim? It may be prudent to shelve expansion programmes, but what if the competitor exploits that to gobble up market share?
At the same time, it is important to spot the silver lining in the economic cloud. Some sectors and companies may suffer less than others. For the more innovative and agile businesses, the gain may well outweigh the pain.
BizWeek spoke to the bosses of several listed companies in diverse industries to get a feel of the thinking on the challenges and opportunities during these trying times.
Piong: Be more prudent in spending
Green Packet Bhd Group Managing Director Puan Chan Cheong
Overall, I see more positives than negatives for the global economy with the possible recession in the US as they (the Americans) need to adjust their unsustainably high level of consumption and strength of the US dollar, which to some extent has hampered the growth of emerging markets.
Siti Fatimah: We’re going clean
and green

Of course, businesses and consumers will be spending less during an economic downturn, due to weaker consumer sentiments.

However, I believe Green Packet and P1 (subsidiary Packet One Networks (M) Sdn Bhd, a wireless broadband provider) are well positioned to not only weather the storm but to seize the many opportunities that present itself during these times.
A particularly attractive opportunity for our talent-driven industry results from the US finding a new position in the global economy.

This will be free up of substantial talent and expertise to migrate to Malaysia and inter-dependent markets. Funds and innovation are also moving into “markets of opportunity”, and we’re on the lookout for partnerships.

We may not have gone through a recession, but we’ve gone through the Internet boom, which was even more challenging for us as it was specific to our industry and sector. It almost wiped out Green Packet.



Having survived that and grown to what we are today is evidence that we can adapt well in tumultuous times.

In fact, I think our business model and strategy is built on an acute awareness that the wind changes direction easily and sometimes without warning.

That’s why we invested in building our WiMAX pillar, which presents us with a longer-term recurring revenue business in the high barrier to entry telecommunications industry.
The same sensibilities led us to our geographical diversification to focus on emerging markets with high growth potential. Furthermore, while personal experience is the best teacher, we must be able to capitalise on the learning and experience of others.
We believe that the global interest in WiMAX technology and solutions continue to be promising, and is in fact accelerating alongside the development of the WiMAX ecosystem.
Hii: Education is generally resilient
From a consumer standpoint, the fact that they need advanced connectivity, a richer Internet experience and a better alternative to the incumbent remains to be the same, and will become more pressing as we progress forward. P1 WiMAX is able to offer that.
Hartalega Holdings Bhd Executive Chairman and Managing Director Kuan Kam Hon
Puan: WiMAX technology and solutions continue to be promising
Our outlook has not changed. Consumption (of gloves) in the medical industry stays the same. The strengthening of the US dollar and the drastic drop in commodity prices have benefited us, but these are probably temporary.

In the healthcare market, it’s difficult to cut spending unless you can switch to cheaper alternatives.


Latex gloves are alternatives to nitrile gloves (Hartalega’s main products), but it’s difficult to see which is cheaper because the prices are correlated.

The volatility creates opportunities to gain market share and to position ourselves for the future.

It’s those who can react to the swings and downturn who will be strongest. We have done well and we will continue to perform well. We are in a good position because of our profitability and prudent spending.

We have gone through the boom and bust cycles. The glove people have learnt to survive the tough times.

Kotra Industries Bhd Managing Director Jimmy Piong

We have reviewed our strategy and decided that there is no need to change it. We will, however, be more prudent in our spending to make sure every sen is spent well. That’s a key area.

We don’t expect much impact on our prescription products because these are essentials. In consumers products, yes, people will be more careful in their spending but our products are mainly vitamins and supplement, which are essential as well.

Also, we focus on products for children. From our experience, it’s the spending on the needs of adults that is reduced first in a slowdown. The spending on children’s products is usually the last to be cut.

We do see opportunities. In the good times, the industry attracts players who are more interested in quick gains and who often don’t play by the rules.

This causes disruptions in the industry. We expect the long-term players to fare better in a downturn. They observe the law and the market is more stable that way. It’s easier to gauge the competition.

We have decided not to defer our factory expansion. We believe the capital expenditure is for the long term.

We can’t allow a short-term crisis to derail our long-term needs, which have been well mapped out.

In the long run, the smaller boys will drop out. Investments in the pharmaceutical industry is all long-term. Long gestation periods are the nature of industry. If we halt our plans now, it will take a long time to resume our cycle.

Octagon Consolidated Bhd Executive Director Siti Fatimah Mohd Shariff

We are in industries (manufacture of coating, waste management and renewable/alternative energy) that require heavy capital expenditure. There are issues in raising security and getting debt funding. The process is slow right now. It’s a global crisis.

We’re looking at several options. For example, we have workable assets such as our coatings manufacturing business and continuous process pyrolysis plant (which will process waste tyre).

A lot of people are looking at the industries we are in. Waste management, for example, is a business for the future. We’re going clean and green. I’m sure there are opportunities. Everyone will be thinking of consolidation. We just need to hang on during the slowdown.

SEG International Bhd Datuk Group Chief Executive Officer Clement Hii

Education is generally resilient, even in a recession. There’s always a need for it. In fact, a downturn may be good for us. Parents may find it hard to send their children overseas for further studies and will instead enrol them in local institutions. Working adults who face slimmer prospects for promotions and salary increments tend to go back to school to upgrade themselves. If you know how to package your products accordingly, you can take advantage of this new demand. One way is to make financing more accessible to these students.

We have spent the last few years focusing on programme in niche areas in the job market and on rebranding. Now, we are reaping the fruits. I believe that the downturn is a good opportunity for smaller and innovative players to go into niche areas.

Back to news releases page
Home  |  About Kotra Pharma  |  Products | Research & Development  |  Investor Relations  |  Careers  |  Links  |  Contact Us  |  Site Map
© 2009 Kotra Pharma (M) Sdn Bhd (90082-V). All Rights Reserved.  |  Disclaimer  |  Web Design by Webz