Central Group shrugs off political woes, boosts investment budget to Bt44 billion
February 19, 2014 00:00 By Bamrung Amnatcharoenrit
Central Group this year will go ahead with an investment plan both internationally and domestically by increasing its annual budget to Bt44 billion - from Bt33 billion in 2013 - despite the ongoing political unrest still casting a cloud over the country.
The majority of the conglomerate’s budget will go to its two core business units: the department-store group and Central Pattana, which is its property development arm.
The investment is aimed at strengthening its business performance, especially in Southeast Asia, where it hopes to become the leading regional brand over the next decade.
Although the Kingdom is plagued by political troubles, the company remains confident over its business prospects, projecting sales growth of 14 per cent to Bt267 billion this year.
Tos Chirathivat, Central Group’s chief executive officer, said the sales forcast was acceptable because the company had factored political and economic risks into the group’s estimated performance.
It has assumed that the political chaos will continue for up to six months but, if something like the current political scenario took the entire year to resolve, the company would have to revise its projection, he said.
"Political tensions have hit the group’s business performance, but only marginally. The group witnessed significant growth of more than 20 per cent annually for three consecutive years, but it is hard to achieve such a rate in the following two years, to be honest. Growth of 14 per cent for 2014 is considered to be high for us," he explained.
"All the different types of crisis that we have faced in the past six years – from financial meltdown and flooding to politics – have helped us to produce immunity. This year, we have secured an investment budget that is higher than in 2013, but what we have to do is to manage the risks … We believe the worst political scenario has already passed," Tos added.
To date, he said, the political climate remained acceptable, as no serious violence had occurred.
While purchasing power was still good, the political turbulence had hit consumer sentiment, resulting in reduced spending and the number of Thais shopping in major stores dropping by 10 per cent.-
However, Central Group believes shoppers can adjust their lifestyle to the changing environment, and that their spending will than return to normal, said the CEO.
The weaker baht would also help boost domestic consumption, he suggested, pointing to the fact that when the currency appreciated strongly last year, it had lured wealthier Thais to increase their spending in stores due to cheaper imported luxury items.
Moreover, the growing economies of the US, Japan and the European Union this year will be a boon for the Thai economy, in that the Kingdom’s exports will start to increase again. The improved economic trend would in turn boost national tourism prospects, he said.
Meanwhile, the group yesterday announced a major organisational restructuring under the concept of "The Next Chapter of Central Group", along with changes in its board of directors and management team.
The restructuring is considered as one of the group’s biggest changes in three decades.
Suthichai Chirathivat has been appointed as chairman of the board, with Suthikiati Chirathivat and Suthichart Chirathivat as vice chairmen. Suthiporn Chirathivat has been made honorary chairman of the board.
The number of business units has been expanded from five to eight – Department Store, Fast-moving Consumer, Hardlines, Officemate, Central Pattana, Central Marketing, Centara Hotels and Resorts, and Central Restaurants – with each having its own CEO to steer the business.
The change is aimed at increasing efficiency and competitiveness in order to become the leader in each sector. This would also fulfil the group’s ambition of playing a rising role on the global stage.
Currently, the group operates 2,809 retail outlets, quick-service restaurants, department stores and hotel properties domestically and internationally.
The company claims to be the country’s biggest local hotel chain – operating under several brands such as Centara Grand and Centara – and also one of the top-three regional brands.
Spreading its wings
Central Group is also making 2014 a year for regional expansion.
In Malaysia, construction is under way of CentralPlaza i-City shopping centre in the town of Shah Alam in Selangor.
Next on the agenda is the Central Department Store Grand Indonesia in Jakarta, followed by Vietnam with two openings of Robins Department Store in Hanoi and Ho Chi Minh City, and also additional openings of sports retail outlets such as SuperSport, Crocs and New Balance.
The regional expansion will cover the major economies in Southeast Asia.
Currently, overseas sales make up 15 per cent of the group’s total. It projects the figure will increase to 20-30 per cent over the next five to 10 years.