Local Brand Going Places - Business News | the Star Online

HUGO is a brand Malaysians barely recognise but in much of Europe, Japan, and some Asian countries, it's a name synonymous with quality leather sofa sets.

In fact, high-end leather sofas, armchairs and dining sets bearing the flagship brand of Yew Hoong Sofa Products (M) Sdn Bhd have been gracing European and Japanese homes for nearly 20 years.

Today the company owns two integrated factories with a combined space of 310,000 sq ft in Semenyih, Selangor, where the sofas are made right from the cutting stage to the finished product.

In 2006 the company chalked up turnover of RM65mil and a net profit of RM2.5mil. This was achieved despite the strengthening of the ringgit, which translated into lower export earnings and rising raw material costs.

Last year Yew Hoong spent RM15mil to set up the second factory, which ate into its bottom line but would in the long run increase capacity, founder and managing director Hiew Hon told

StarBiz

in an interview.

He said the company's turnover growth had averaged 20% a year from 2005, with annual profit growth averaging 12% to 15%.

When the second factory is ready in a year, the company would be able to ramp up production to 1,500 40-ft containers from 1,200 currently. And in five years, Hiew expects output to double to 3,000 containers.

He said the company was eyeing a listing on Bursa Malaysia as it met the required profit track record, but it felt that there was no rush to do so.

"We intend to apply for a listing, but we want to do that only after we achieve our best performance and have something to show.''

Europe accounts for 60% to 70% of Yew Hoong's exports. Leather sofas make up some 50% of its products while dining tables and chairs, bed frames and arm chairs, mirrors and bar stools account for the other half.

The company exports 99% of its output, which find their way to Germany, Denmark, Ireland, Italy, the Netherlands, Spain, Dubai, Canada, Japan, Singapore, South Korea, Taiwan and Australia.

It also supplies, although in limited numbers, its leather sofa sets to high-end local furniture distributors which price the sofas at above RM10,000 per set.

This year, the company joined the

Golden Bull Award 2007

for the first time and was ranked among of the country's top 25 small and medium-sized enterprises.

Hiew, 55, left school after finishing Form 3 and started as an apprentice with a sofa maker in Cheras, earning a monthly salary of RM20. Later he was asked to help out his brother in Kuala Lumpur and was paid RM50 a month.

During the recession in the late 80s, he started making PVC and fabric sofas in the backyard of his house in Sungai Chua new village in Kajang.

When his third child was three years old, his wife Teo Hock Kiang gave up her tailoring job and started to help out in the business.

Teo found her skill as a tailor an asset to the business as she could apply her expertise in cutting out patterns to sofa making and utilise her knowledge of fabrics in improving designs.

Hiew said Yew Hoong was already making moves to venture further afield by entering the medium-range segment in the US market in a big way.

"We've made contact and we think we can make a go at the medium-range segment because the American market is price-sensitive.

"We also plan to go into higher-end products that are on par with those made by Italian manufacturers in terms of design.''

In a year, he said, the company would start looking for agents to make inroads into the US market.

On future earnings, Hiew said the 10% to 15% rise in raw material costs in the last two years and the strengthening ringgit had affected export earnings.

He said a "good level'' for the ringgit would be 3.50 to the dollar.

Hiew expects the company to counter the negative effects of the appreciating local currency by focusing on higher-end products, which its research and development unit is currently working on.

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