First Appeared on 23rd August 2023 on DigitalCFO Asia
As the world grapples with geopolitical tensions, economic fluctuations, and mounting challenges such as strained relations between major nations and inflationary pressures, the business landscape is fraught with complexities. These factors, coupled with the ongoing impacts of the global pandemic, have cast a shadow over local and global macroeconomic stability.
Despite this intricate backdrop, businesses continue to chart their course, striving to capitalise on opportunities and maintain growth trajectories. In this insightful piece, Teh Kok Hann, the CFO of Niro Ceramic, engages in a comprehensive discussion with DigitalCFO Asia. Kok Hann delved into a multifaceted exploration of these priorities, diving deep into their significance and the strategic approaches employed.
Key Company Priorities for 2nd Half of 2023 and Fuelling Innovation and Growth
The geopolitical tensions and strained relationships between the United States and China, coupled with Russia’s military action in Ukraine, have threatened both local and global macroeconomic stability. Apart from that, stubborn inflation and escalating interest rates in many countries worldwide have further clouded economic recovery prospects.
Despite these challenges, Niro Ceramic Group has experienced a promising start in the first half of 2023. The company expresses optimism about maintaining this momentum as it transitions into the second half of the year. The central focus of Niro Ceramic Group is on bolstering its group strategy to become one of the trusted global sourcing players in the tile industry. To achieve this objective, the company recognizes the importance of strengthening the supply chain process. Ensuring that the tiles retain their premium quality while effectively managing costs is a key goal. The top priority for Niro Ceramic Group is to ensure that customers’ orders are fulfilled satisfactorily, minimising disruptions to their construction and development projects.
Furthermore, Niro Ceramic Group demonstrates a commitment to investing in new product development. The company has established an 18-month program for launching new products, starting in January 2023. This initiative is designed to meet market demands and align with growth objectives. The Global Product Development team at Niro Ceramic Group is dedicated to creating products that are both aesthetically pleasing and technologically advanced. Notably, this includes the Slip Stop and Slim ranges of products.
In the previous year, Niro Ceramic Group also initiated a co-branding effort in collaboration with one of Indonesia’s premium Batik designers, Irwan Tirta. This strategic partnership enables the incorporation of batik designs onto the company’s tiles. This collaboration exemplifies the company’s commitment to merging artistry with functionality, further solidifying Niro Ceramic Group’s position at the forefront of innovation.
Elevating Investor Trust: Strengthening Corporate Governance Practices for Companies
“Even though Niro Ceramic Group is not yet a publicly listed company, the organisation has maintained a strong framework for corporate governance for numerous years,” says Kok Hann.
This framework encompasses a robust financial reporting system. Regular board meetings are conducted to provide updates on financial performance to the board of directors. During these meetings, the company’s short-term and long-term business strategies are deliberated upon, ensuring the sustainability and triumph of its operations.
Furthermore, Niro Ceramic Group has firmly established a commitment to audit procedures, facilitated by its dedicated in-house internal audit team. This team reports directly to the chairman of the audit committee, who holds a non-executive director position within Niro Ceramic Group. This direct reporting line guarantees that the audit committee possesses comprehensive visibility and control over the internal audit program and its findings.
Kok Hann also emphasises that the company operates under a whistleblower policy that extends to both internal and external parties. This policy has been devised to mitigate potential instances of fraud and malpractice among employees and the senior management team. By implementing such a policy, the organisation actively fosters transparency and accountability within its ranks, values that constitute the bedrock of its business ethics.
Anticipated Opportunities and Challenges for the Year Ahead and Strategic Company Preparations
In Asia, and particularly South East Asia, market and development growth have remained resilient and continue to rise, despite the ongoing uncertainty in the global economy. Active and growing developers and construction companies are cautious when appointing suppliers. It is important for companies to prioritise the provision of product quality, competitive pricing, and consistent supply as this will not only enhance their competitive advantage over rivals but also serves to deter the presence of short-term and one-off deal-focused parallel importers.
“However, the rising interest rates and fluctuating gasoline prices pose significant uncertainties for the management team. In the long term, we anticipate a consolidation of market players in the region to ensure survival,” adds Kok Hann.
As CFO, Kok Hann’s role spans several key areas to ensure Niro Ceramic Group can capitalise on emerging opportunities and navigate smoothly through the challenges ahead.
In terms of net working capital management, their finance team maintains a keen eye on inventory levels, performing detailed analyses on the stock mix, coverage, and inventory turnover days. The finance team alerts the sales and operations teams for immediate corrective action if necessary.
Credit control and collection is another important aspect, where the team under finance mitigates credit risk without negatively impacting sales operations. The effective collection ensures the liquidity of the Group.
“Strong cash flow management is also essential,” emphasised Kok Hann.
The finance team conducts monthly and weekly rolling forecasts on cash flow, meticulously overseeing the Group’s cash flow status. Niro Ceramic Group’s treasury team cultivates robust connections with the organisation’s core bankers, consistently apprising them of the company’s financial performance and cash flow stance. These bankers remain prepared to extend appropriate financial assistance whenever the need arises.
Harmonizing Sustainability with Financial Decision-Making and Long-Term Growth Strategies in Companies
The management team works closely with the board of directors, particularly concerning significant investments. Key performance indicators, such as return on investment (ROI) and payback period, are presented to and reviewed by the board. All substantial investments are considered thoroughly before management proceeds with investment activities.
Over the years, Niro Ceramic Group has been self-financing, requiring no equity or capital injections from shareholders, and have been able to pay a minimum of 6% dividends to shareholders, barring the years affected by the pandemic. The reasons Niro Ceramic Group has been able to achieve this are multifaceted:
- Maintained excellent working capital management;
- Kept a reasonable gearing ratio thanks to the strong support of core bankers
- Posted good financial results with a healthy gross margin and well-controlled operating expenses.
- Strong supply chain management and solid business partnerships with original equipment manufacturer (OEM) suppliers
These have been instrumental in Niro Ceramic Group’s sustained success and financial health.
When Aiming for an IPO, How Can a Company Strategically Showcase Its Growth Potential To Attract Investors?
Aiming for an IPO demands a strategic stance from a company, necessitating the adept showcasing of its potent financial performance and substantial growth prospects. This entails accentuating a fortified business model, well-laid avenues for future expansion, and an unwavering strategy for bolstering the supply chain.
Integral to this process is the prominent display of efficient risk mitigation and an unwavering dedication to sustainability. By amalgamating these elements, the company can effectively allure investors, painting a vivid picture of stability, burgeoning advancement, and an unwavering dedication to fostering enduring value.
Against a backdrop of worldwide uncertainty, the dedication to refining supply chains, fostering innovation, and upholding robust corporate governance principles not only underscores the potential for companies to flourish amid adversity but also highlights their adaptability. As we approach the latter half of 2023, the pursuit of excellence, the integration of creativity with practicality, and the cultivation of strategic insight showcased by various enterprises encapsulate the spirit of navigating transformation. In an era marked by uncertainty, these journeys exemplify the enduring resolve, resilience, and advancement that businesses embody.