Higher costs push Singapore firms to relocate factory to Johor

Rigging equipment company KTL Global will keep its headquarters in Singapore, but is moving most of its manufacturing operations to Johor.

Executive director Mark Beretta said yesterday at the firm’s first media briefing in recent years that high costs in Singapore caused by foreign worker levies, utility charges and land leasing have led to this relocation.

“There will inevitably be job losses,” he said. “But we are trying to minimise this by transferring the workers over instead.”

KTL employs more than 100 people at its headquarters and its factory, which manufactures synthetic slings, lifting slings and mooring ropes. Its headquarters will continue to be in Tuas.

The company intends to increase staff numbers in Malaysia from 18 to 50 by the end of the year. It gave details of its move in a corporate and business update, which included a plan to increase penetration into markets in North Asia.

Relocation to the new site in Tanjung Langsat, a port 45km east of Johor Baru, has already started and is set to be completed by June this year. Mr Beretta said the move will reduce operating costs by about 30 per cent.

The company will also receive revenue from the subletting of unused space in Tuas. It has already leased out more than 70,000 sq ft of space this year.

The cut in operating costs is one of the reasons the company is optimistic about its outlook.

In February, the company announced that second-quarter net profit for the three months ended Dec 31 fell 7 per cent to $665,000 from a year earlier.

But revenue rose 19.7 per cent to $20.6 million.

The fall in the bottom line was due to a one-off gain in 2013 as a result of the sale of plant machinery.

Chief executive Wilson Tan said that even with a fall in crude oil prices, the group’s move to “scale up the value chain” and “create new revenue streams” puts the firm in a good position.

He cited increased demand for synthetic ropes. KTL does in-house research and development to produce synthetic ropes that are lighter than steel ropes and able to handle heavy weights without elongation.

These ropes are in high demand because they are easier to handle and can save both time and money for customers.

Another shift in the industry is that of shifting from capital expenditure to operating expenditure – companies now prefer to lease equipment rather than buy equipment.

This bodes well for KTL, which provides such services. The group intends to focus on these higher-margin services.

KTL’s share price closed 0.3 cent higher at 18.8 cents yesterday.

– See more at: http://business.asiaone.com/news/higher-costs-push-firm-relocate-factory-johor#sthash.tJ97Ffmx.dpuf

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