TA WIN HOLDINGS BHD
KLSE (MYR): TAWIN (7097)
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CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
limyauc
30 posts
Posted by limyauc > 2019-11-08 11:06 | Report Abuse
OPERATIONAL REVIEW
The new management team has implemented multiple operational improvement initiatives this year, with significant positive impact to the effectiveness and efficiency of our operations.
Our main supplier contract has been renegotiated from a high fixed monthly commitment to a lower flexible one. This reduces our risk of inventory build-up during potential seasonal or cyclical slowdowns in the market.
In fact, our profitability in this fiscal year was materially adversely affected by such inventory build-up, which was caused by a major equipment malfunction in the beginning of the year. TWI’s furnace was down for almost a month, during which coincidentally the market price of copper dropped from $7,000/tonne to less than $6,000/tonne due to the emergence of the US-China trade war.
As a result, our average inventory cost increased dramatically compared to the market price, and we were forced to sell our products below cost. At that time, we quickly flew in an expert from our equipment supplier’s headquarters in Finland to fix the issue, provide updated operating procedures, and train our staff on best practices to avoid any future malfunctions. Since then, we have not had any such equipment breakdowns, nor do we expect any in the future.
Furthermore, we have implemented commodity hedging practices using forward contracts and swaps from local banks to ensure that even when we do not have sufficient sales contracts to cover our incoming raw materials, we can lock-in a future selling price based on the prevailing market price at the time. In general, we follow a back-to-back arrangement with both our customers and our suppliers to lock-in the same price to avoid commodity price risk. Our back-to-back arrangement, together with our hedging facilities and our renegotiated supply contract, effectively secures us from any material commodity price risk.
Another major important undertaking this year has been the sale of our old drawing equipment (used to “pull” the rods and wires to reduce their diameter) to make way for brand-new Industry 4.0 equipment to replace it. The new equipment will be much more energy and labour efficient, and will take up a smaller footprint in our factory, making room for future expansion. We have also redesigned and re-arranged the factory to a much better organised layout, providing a better work environment for our staff