Mar 2014

Category: Business
Written by Super User

Former head of Dole Food's local unit has transformed a small firm into a professionally run operation If you were to ask Somkiat

Chavalitvorakul to describe each of the financial steps of Kuiburi Fruit Canning's development prior to his joining the company in 1997, he would probably decline to say anything. Indeed, Somkiat really has no idea of the company's financial history. And it's quite possible that nobody else could understand the old accounting books, either. Even today, it remains commonplace in Thailand for most small, family-run firms to say they are not yet ready to develop their accounts into a credible standard, which in turn scares off banks from lending them money. The accounting versus bank-lending dilemma has caused the government's attempts to promote the small- and medium-sized enterprise (SME) sector to make slow progress. This is a national problem. But Somkiat, who was brought into Kuiburi following the entry of a new group of shareholders in 1997, made a courageous decision to introduce a new corporate-governance standard to the company. The shareholders had given him permission to head the firm in a new and professional way. Besides revamping production, financial methods and operations, Kuiburi's corporate restructuring began with the basics of accountancy. Somkiat agreed to fork out a small fortune by replacing the company's auditors with a professional auditing firm recognised by the banking community. "It would have been alright if it had only been me who oversaw the bookkeeping, but as the company has changed from a family run into a professionally managed company, the accounts have to meet professional standards," he said. According to Somkiat, who brought 23 years of experience of working with Dole - the international food corporation - having well-audited accounts has not only helped Kuiburi establish an easier working relationship with the banks, the transparency of its accounts also help in internal management. "Eventually the [poorly audited] books could make you delude yourself, and this could lead to you making a wrong decision", he stated. Now after four years of Somkiat being in charge, Kuiburi has seen its revenues double to Bt1 billion, while tripling its workforce from about 500-600 to 1,600-1,700. The company has recently made a profit after years of losses. Following the improvement in the bottom line and the firm's transparent accounting, Somkiat said many banks were now competing to lend it money. "Competition is high in the banking industry. Financially strong companies have not borrowed, while the banks can't lend to NPL [non-performing loan] firms. We are among companies in the middle, which still have to rely on bank loans," he explained. Somkiat added that it had been this pressure for survival which forced him to introduce several drastic measures in a bid to turn the company around. There is no easy way to do this. For instance, he said it took Kuiburi two years to train its factory mechanics how to systemise the spare-parts inventory and achieve good preventive maintenance. Kuiburi has also broken a tradition in the canned-pineapple industry, which usually has to shut down for about three months during the low season, by operating all year round. The reason is simple "the loan interest never stops", he said. Using an information database as part of the company's decision-making process is another area of improvement. "Before there were only 2 PCs. Now we have about 50-60 PCs used to track yields, cost, sales, raw materials, and for accounting," he said. Canned fruit is in a commodity business where product price determines a great deal. To hit the lowest cost is a matter of life or death for the company. Expanding the company's production capacity, thus giving it a better economy of scale, has also been a key behind today's achievement, said Somkiat. But instead of simply buying the machinery for expansion, he found Kuiburi should be able to build its own machines. He went to the National Science and Technology Development Agency (NSTDA) and won the first Bt11-million loan from the agency under a technology-assistance programme. According to the NSTDA, under its soft-loan and technical-assistance scheme, Kuiburi will be able to improve its evaporator machinery to give a production capacity of 6,200 litres per hour, up from 3,900 litres previously - thus saving Bt19 million, plus a further energy saving cost of Bt2.2 million per annum. "Without the support of NSTDA, our expansion and recovery would have been much slower than this," he said. Pichaya Changsorn


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