Churning Out Cold Hard Cash

The Star, Saturday 25th February, 2012
By CECILIA KOK
cecilia_kok@thestar.com.my

Atlas Ice prides itself on having built a sound business as it commemorates its 100th anniversary

Be it on the highways or on the byways, those white delivery trucks bearing the Atlas brand are a familiar sight all over Malaysia for a long time now. They are owned by the leading edible ice producers in the country, The Atlas Ice Company Bhd, which happens to also be one of the largest in South-East Asia.

Chee: Competition is very stiff. It
all boils down to striking a balance
between pricing and service

Often, their drivers are seen unloading the goods from the trucks to deliver to their customers in the increasingly busy streets of Malaysia especially in the Klang Valley. One driver explains the hectic schedule truck attendants have as he leads the StarBizWeek team to the company's office-cum-factory, which is tucked within the concrete jungle of Sungai Besi in Kuala Lumpur.

In their kind of business, speed is also of utmost importance. They have to move fast, lest they risk letting a business opportunity melt away to competitors, the truck attendant explains.

“Competition is very stiff in this industry,” concedes Chee Kim Hoon, the executive chairman and chief executive officer of Atlas Ice Co.

As it turns out, the sale doesn't always go to the strongest brand. In fact, in this game where all players sell an identical or homogenous product, the brand name doesn't even count.

“It all boils down to striking a balance between (right) pricing and (reliable) service,” Chee says of the most effective way for the company to gain an edge over its competitors.

By that, he means selling the company's product at competitive prices, while maintaining a  reasonable profit margin, and ensuring timely and orderly delivery of goods to its customers, which range from large chain store retailers, convenience stores and restaurants to small-time street vendors.

A simple strategy and yet it has been one of the most effective ways to keep the company alive and going strong over the last 100 years.

Coming of age

From a cottage industry co-founded by Chee's banker grandfather, Chee Swee Cheng, in Malacca in 1907, Atlas Ice today is one of the largest tube ice producers in South-East Asia, churning out 10,217 tonnes of tube ice per day, with a total of 84 branches spread across the region.

The company, which was incorporated on Feb 27, 1912, today boasts a total asset worth more than RM500mil.

Cool machines: Atlas Ice is planning to acquire new trucks to
 increase its fleet, which now stands at about 1,700 nationwide.

According to Chee, Atlas Ice was first initiated with a primary aim to break the monopoly of European-owned ice manufacturers that had been making huge profits by selling their products at high prices.

Atlas Ice came in to produce block ice for sale at affordable prices to ordinary folks in Malacca, and it had been a successful business from the start. But incisive businessmen always know that change is the only constant in life.

While producing block ice had been a solid business for Atlas Ice, its early leaders had noticed new industries and services emerging and creating new demands and business opportunities since the end of World War II.

In an increasingly competitive business, Chee says, the company's leaders reckoned with the need to re-adapt and change by diversifying beyond the company's traditional scope and into plantations to remain relevant and competitive.

Plantations remains one of Atlas Ice's core businesses today. It owns 1,090.17 ha of oil palm plantation and 44.29 ha of rubber plantation all in the peninsula.

Prominent leaders

Since its inception, Atlas Ice has boasted of having prominent individuals on its board. These included co-founder Swee Cheng, Tun Tan Cheng Lock, Tan Sri Lee Kong Chian, Tan Sri Tan Chin Tuan and Chan Seng Kee, among others.

Chee gives them the credit for laying a solid foundation that has enabled the company to grow to where it is today. Nevertheless, Chee is no less capable than his predecessors.

A banker, like his grandfather, Chee took over the helm of Atlas Ice in May 1990 after resigning from a lucrative job with OCBC Bank's finance subsidiary.

He managed to implement a roadmap to re-energise and modernise the company's ice operations when demand for block ice was clearly on the decline.

Chee led the company's diversification into production of tube ice in the early 1990s. The product has since become the company's mainstay.

He also led the company's diversification into property business by acquiring several commercial units in Singapore's prime business areas.

Regional focus

“While we have reformed and adapted to the changing trends of the business world, we've never lost focus in what we do best,” Chee says.

“We are very clear about our strengths and what our core businesses are, and hence, we will continue to build on that,” he adds.

Chee wants to build Atlas Ice into the largest (not, just one of the largest) tube ice producer in the Asean region. The company is currently operating 13 plants in Indonesia, and one each in Brunei, Singapore and Cambodia.

He plans to set up four new factories across Indonesia this year to strengthen the company's presence in the country.

“Indonesia is our main focus in the region; it's an attractive market for us because of its huge population,” Chee says.

Atlas Ice is currently building its second factory in Brunei. The plant is expected to start operations in June this year.

This year will also likely see Atlas Ice venturing into Vietnam its sixth destination in Asean after Malaysia, Singapore, Brunei, Indonesia and Cambodia. It is currently in the advanced stage of negotiations to acquire a piece of land in Ho Chi Minh City to build its plant.

“Our next target is Myanmar,” Chee says.

While regional expansion is high on its agenda, Atlas Ice is not about to forsake its business plan for Malaysia, where it has more than 60 plants in operation nationwide.

“Malaysia's market is not saturated for our industry. There's still potential of growth, only at a slower pace compared with before,” Chee explains. Atlas Ice is currently looking at opening two new tube-ice plants in Malaysia.

To up its game, the company is drafting a plan to acquire new delivery trucks to increase the size of its fleet, which currently stands at about 1,700 nationwide.

As for its plantation business, Atlas Ice is exploring opportunities to expand its acreage in Indonesia, Cambodia and Vietnam.

There is no plan to increase its acreage in Malaysia, Chee says, as land in the country has become too expensive to justify the investment.

Cash business

With such extensive multi-million-ringgit expansion plans in the pipeline, how does Atlas Ice finance its ambition? Chee indicates that financing will be mainly through internally generated funds.

“Ours is a cash-flush business,” he points out, adding that more than 90% of its business is conducted in cash.

“We do borrow from banks, but our borrowing policy is very conservative,” Chee says, highlighting the company's preference to remain as lowly geared as possible.

For its financial year ended Sept 30, 2011, Atlas Ice managed to rake in a pre-tax profit of RM55mil on turnover of RM262.2mil, compared with a pre-tax profit of RM49.7mil on turnover of RM245.3mil in the corresponding period the year before.

The company declared a dividend of RM1 per share for financial year 2011, compared with 30 sen per share for financial year 2010.

On whether the management would list the company on the local stock market, Chee says there's no such plan as yet. They are contented with the status quo as it does not need the company to comply with complex capital requirements.

Chee says the company's present priority is to focus on enhancing and improving its ongoing operations as well as to explore new business opportunities and the possibility of venturing into non-traditional activities to generate high growth for the company and bring in more return to shareholders.

It also plans to continue upgrading and modernising its business operations to boost efficiency and productivity in the face of rising energy and labour costs and intensifying competition.

Indeed, the company is already laying the next foundation to ensure it is well-positioned to be competitive and relevant in the next century.

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