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Published on March 18, 2008

Leading auto-parts manufacturer Somboon Advance Technology (SAT) is moving into non-automotive markets to reduce its business risk and maintain long-term double-digit growth.

The growth in the automotive industry is expected to decelerate in the next five years. Therefore, Somboon plans to generate around 10 per cent of its total revenue from non-automotive sources in five years, president Verayut Kitaphanich said.

"If we want to boost our revenue by more than 10 per cent a year, we need to serve the rising demand for parts in other industries such as air-compressors and agricultural machines," he said.

SAT has begun producing tractor-parts for Kubota, the country's leading cultivation machine manufacturer, which will be an important component of the extra revenue drive.

Verayut said the company had spent Bt400 million on increasing the production capacity of coil springs from 120,000 units per month to 255,000 to cope with the surging demand for auto parts in eco-car projects and Kubota's products.

Of the Bt400 million investment, half will come from debt financing and the rest from the company's cash flow. The new capacity is scheduled to run at the end of the third quarter, he said.

Worapote Chutchaikulsiri, vice president of finance and accounting, said SAT's targeted revenue this year was Bt5.5 billion, an increase of 12 per cent from last year due to more orders from its existing automotive customers and Kubota.

With its aggressive material-cost management, it expects to maintain its gross profit margin and net profit margin of more than 20 per cent and 10 per cent, respectively.

Worapote said SAT had a plan to expand its business into India and China within a few years.

"We will probably make a joint venture with local partners to establish a production plant there. We are interested in investing there as they are emerging markets," he said.

Presently, it directly exports to Japan, Korea, Indonesia and Australia.

Last year SAT generated revenue of Bt5.09 billion, up from Bt4.39 billion in the previous year, thanks to the robust growth of automotive exports.

It recorded net profit of Bt591 million, up 33 per cent year on year due mainly to higher sales and lower production costs. It recorded a backlog worth Bt2.8 billion last year, covering the next nine years.

Chalida Ekvitthayavechnukul

The Nation