1

ISSU

E 1

A quarterly publication of the Malaysian Rubber Export Promotion Council

First Quarter 2012 KDN: PP15077/05/2011 (029772) Volume 6

uSANCTUARY HEALTH SDN BHD

v ALTORABA INDUSTRIES SDN BHD

w YOUNG MAN DEVELOPMENT (M) SDN BHD

u

w

v

Rubber Product SMEsPrimed for growth

2

FROM THE CEO’S DESK

2

ContentsFrom the CEO’s Desk 2

MREPC Research Briefs 3

Malaysia’s Exports of Rubber Products 2011 8

Rubber Products SMEs – Primed for Growth 10

Malaysian Rubber Product Trade Statistics 16

Market Promotion Activities 17

Seminars & Workshops at MREPC 19

Editor-in-Chief: DATO’ TEO SUAT CHENG

Editor: EN. ADNAN ABDULLAH

For comments, enquiries and advertisements, please contact:The Editor,MREPC,Block 2A, Level 13A-1, Plaza SentralJalan Stesen Sentral 5, 50470 Kuala Lumpur, MalaysiaTel : 603-2780 5888Fax : 603-2780 5088E-mail : stretch@mrepc.comWebsite : www.mrepc.com

Printed by:KSB PRINT SDN BHDNo. 18, Lingkaran Industri, Taman Cheras Emas, 43200 Cheras, Selangor

CEO of MREPC Dato’ Teo Suat Cheng

M alaysian rubber product exports recorded an unprecedented RM14.2 billion in value in 2011, up from RM12.9 billion in 2010, an increase of 10.1%. While exports to traditional

markets grew by almost 7%, the increase in exports to new and emerging markets was 19.5%. Growth of exports to these markets is sustained by increasing populations, economic development, and rising incomes and expectations among the people. The sectors of the economy that are critical for increasing demand for rubber products, including healthcare, automotive, mining and infrastructure development, are expanding in the BRIC countries, and in countries such as South Africa, Saudi Arabia, UAE, Mexico and Argentina and in ASEAN countries, notably Indonesia and Vietnam.

These are the markets that hold potential for Malaysian exporters and these are the markets that MREPC has targeted in its market promotion activities over the last three years. The increase in exports to these markets is vindication of the efforts of Malaysian exporters in venturing into these new markets, sometimes with MREPC and also on their own.

As the developed economies enter a period of uncertainty, with the Euro in crisis and unemployment still high in the United States, new and emerging markets will continue to be the focus of attention of MREPC’s market promotion efforts. MREPC will review and step up research efforts, to obtain relevant and up-to-date market information, identify market prospects and examine ways of accessing these markets. Such market information and trade data will form the basis for market promotion programmes and activities that are being planned.

MREPC will continue to encourage Malaysian exporters of rubber products to participate in trade shows and exhibitions in new and emerging markets and take part in trade missions and working visits to meet prospective trade partners in countries with potential for growth. Advertising to increase awareness of Malaysia as a source for quality rubber products will also be targeted at audiences in developing economies, while not neglecting developed markets.

Market research reports, trade data and analyses, and other market information, so essential for exporters planning their marketing strategies, will continue to be made available to Malaysian rubber product manufacturers in easy to use formats, online and in seminars and workshops.

As always, MREPC welcomes ideas and suggestions as to how we can make existing programs more effective and on new activities that can help Malaysian rubber product manufacturers achieve their goals.

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MREPC RESEARCH BRIEFS

1. The Market for Rubber Automotive Parts in IndiaThe market size for rubber automotive parts in India is estimated to be around USD765 million in 2011. The market has grown by 13%-14% on average per annum over the past 5 years. Strong demand for automotive components and parts from the sizeable original equipment manufacturing (OEM) market in India as well as from the fast growing domestic replacement parts market (REM) contributed to this healthy growth.

The Indian Automotive IndustryThe automotive industry in India has recovered strongly from the global economic recession which began in 2008. Sales and production of vehicles in the country recorded a remarkable growth of over 25% per annum in 2010 and 2011 while vehicle exports have increased consistently since 2005.

The automotive market in India (million units)

2004 – 2005 2005 – 2006 2006 – 2007 2007 – 2008 2008 – 2009 2009 – 2010 2010 – 2011

Production 8.44 9.72 11.07 10.84 11.16 14.03 17.90

Domestic Sales 7.90 8.90 10.12 9.65 9.72 12.29 15.52

Exports 0.64 0.81 1.01 1.24 1.53 1.80 2.34

India’s growing domestic economy and a relatively low vehicle ownership rate of 11 units per 1,000 persons have made the country an attractive market for automotive investments. In 2011, the value of India’s gross domestic products (GDP) touched USD1.84 trillion, a three-fold increase from 2003. Apart from that, the country’s low manufacturing costs in terms of raw materials and labour enable automobile makers to produce affordable vehicles for sale in the domestic market. For the period 2003-2010, the total cumulative investment into the industry was estimated to be USD43 billion with an average growth of 20% per annum.

The key factors contributing to the growth of the automotive industry are the growing middle income group, rapid growth in the industrial and agricultural sector, and improvements in infrastructure including the expansion and modernization of the road network across the country.

The Automotive Parts SectorThe Indian automotive components sector expanded from an estimated value of USD8.7 billion in 2005 to USD30 billion in 2011. The components, including a wide range of rubber parts, are categorized into six different vehicle subassemblies, namely, body and structural which constitutes about 40% of the market size, engine and exhaust (20%), suspension and braking (10%), transmission and steering (10%), electronics and electrical (10%) and equipment and others (10%).

Looking at the market for rubber automotive parts, the passenger vehicle (PV) segment is the largest consumer of these products in India, accounting for about 54% of total consumption in 2011. This was followed by the commercial vehicle (CV) segment, two-wheelers (2Ws) and three-wheelers (3Ws).

4

Rubber automotive parts: Market size by vehicle segment (million USD)Rubber automotive parts: Market size by vehicle segment (million USD)

4

The domestic supply of rubber automotive parts constitutes about 76% of the Indian or USD585 million. The rubber parts sector in India comprises a number of cost effective and quality suppliers who are able to supply a wide range of rubber automotive products. Currently, the sector has around 1,000 manufacturers who can be classified into organized or unorganized segments.

The organized segment accounts for about 8% - 10% of the total number of manufacturers and they dominate the OEM market. They comprise established companies that have adequate infrastructure and modern facilities, with in-house design capabilities as well as research and development divisions. These companies are capable of manufacturing precision engineering components required by the automotive industry. The unorganized segment on the other hand, comprises small and medium-scale companies that focus mainly on the aftermarket sector. These companies may be contract manufacturers to Tier I and Tier II suppliers and they have limited production and design capabilities.

About 24% the total market for rubber automotive parts market in India was supplied by imports which were valued at USD180.1 million in 2011. For the period 2007-2011, imports of rubber parts into India registered a CAGR of almost 18%. Products categorized under moulded rubber parts such as rings, seals, gaskets and bushings were the largest imports, accounting for about 68% of the total imports in 2011. Japan, Germany, the US and China are the major source countries for these imports. Malaysia’s major exports to India were hoses, rubber profiles, weather-strips and mats.

Rubber automotive parts: Market size by vehicle segment (million USD)

Indian imports of rubber automotive parts, 2007-2011

Total Size - USD 765.1 million

PVs, 413.1

CVs, 221.9

2Ws, 122.43Ws, 7.7

93.3

2007

114.4

2008

121.7

2009

130.4

2010

180.1

2011

200180160140120100806040200

US

D m

illio

n

PVs – Private vehiclesCVs – Commercial vehicles2Ws – 2 wheelers3Ws – 3 wheelers

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Market Outlook The market for rubber parts in India is projected to expand from USD765.1 million in 2010-2011 to USD1.25 billion by 2014-2015. Passenger vehicles and two-wheelers are the key segments that will drive demand for rubber components and parts. The main contributors to the expansionary market outlook are projected increases in domestic automobile sales as well as the expansion of the aftermarket for automotive components in India over the next five years as more vehicles are come on to Indian roads. The projected increase in exports of automotive components from India will also be an important contributor to the demand for rubber automotive parts in India.

2. Medical Gloves Consumption in MalaysiaThe market for medical gloves in Malaysia is expected to continue growing in line with increasing healthcare expenditure and growing public demand for quality healthcare in the country. Spending on healthcare is forecast to reach 7% of GDP by the year 2020, as Malaysia works on improving its healthcare standards and delivery systems, to levels comparable with developed countries. In 2010, the country’s healthcare expenditure stood at RM33 billion, equivalent to 4.4% of GDP.

A recent study by MREPC found that the market for medical gloves in Malaysia, in terms of domestic consumption, is estimated at 130.6 million pairs or about 10.9 million pairs of gloves on average per month in 2010. Public hospitals are the largest users of medical gloves, accounting for more than 55% of the country’s total consumption for the year.

Market size for medical gloves in Malaysia, 2010

Medical Institution

Domestic Consumption(million pairs)

Public Private Total

Hospitals 66.75 18.24 84.99

Clinics 5.84 35.84 41.68

Medical Labs 0.29 3.63 3.92

Blood Banks 0.02 0.02

TOTAL 72.90 57.71 130.61

States with the highest concentration of healthcare facilities, particularly hospitals and clinics, are the major markets for medical gloves. In the public healthcare sector, Johor, Selangor and Sarawak are the three largest markets for medical gloves, accounting for 36.5% of total consumption. Other major markets include Sabah and the Federal Territory of Kuala Lumpur and Putrajaya, accounting for 10.0% and 9.0% respectively.

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Healthcare in MalaysiaHealthcare has been identified as one of the twelve National Key Economic Areas (NKEAs) in the Economic Transformation Plan (ETP) announced in 2011. It was identified as one the potential growth drivers that could contribute to the overall economic growth of Malaysia.

The healthcare system in Malaysia is administered and regulated by the Malaysian Ministry of Health (MOH). Healthcare services are provided by both the public and private sectors. Based on the most recent figures, there are about 8,655 medical institutions across Malaysia. Private medical institutions account for 66% of these, while the remaining 34% were public medical institutions.

Distribution of gloves by state (Public Sector)

Medical Institutions in Malaysia

Type of Institution Public Private Total

Hospitals (General & specialists) 139 122 261

Clinics (General practitioners, health centres, specialist clinics & dental services) 2,815 5,411 8,226

Medical Laboratories 4 164 168

TOTAL 2,958 5,697 8,655

Glove consumption patternsDuring the period 2007-2010, use of medical gloves in public institutions increased steadily by 6.03 million pairs to 72.59 million pairs. In 2010, the consumption of examination gloves was three times more than surgical gloves.

0 2,000 4,000 6,000 8,000 10,000 12,000

PerlisNegeri Sembilan

MelakaTerengganu

KelantanPahang

Pulau PinangKedahPerak

Wilayah PersekutuanSabah

SarawakSelangor

Johor

9461,394

2,9223,091

3,8904,222

4,5365,430

6,4886,681

7,3757,679

9,6039,685

Thousand Pairs

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Medical institutions in Malaysia prefer latex medical gloves compared to synthetic and vinyl gloves. Close to 90% of the institutions use only latex medical gloves whereas 5% use both latex and synthetic gloves. The selection of gloves is based on five main criteria: tensile strength, comfort and fit, ease of donning, durability and pricing.

On average, consumption of gloves by public hospitals is about 1,773 pairs per year per hospital bed whilst consumption by private hospitals is 1,092 pairs per bed. Gloves are mainly used in operating theatres and wards, with each department accounting for about 16% - 17% of the total gloves consumed. Approximately 11.8% of gloves are used in emergency units (ICU) and 9.4% for outpatient care. Glove consumption by clinics is approximately 5,070 pairs per year per clinic, with private clinics using significantly more than public clinics. For medical laboratories, average consumption is around 23,300 pairs per year, with public labs using much more than private labs. Consumption by medical labs is significantly higher than consumption by clinics as medical staff in the labs change gloves more frequently, for every sample received.

Overall, the three main factors influencing the demand for gloves by different institutions are the type of medical institution (public or private), the number of hospitals beds and the number of patients. The more patients an institution has, the higher the turnover per bed, thus leading to a higher demand for medical gloves.

Outlook for Glove ConsumptionGiven the continuous investment in the healthcare industry and increasing awareness regarding better healthcare services and standards, the market outlook for medical gloves in Malaysia will be positive for the next few years. Demand for medical gloves in the Klang Valley is estimated to expand by 15%-40%, varying by the type of medical institutions.

Demand for medical gloves from private institutions is expected to increase significantly, with the establishment of new and modern healthcare facilities operated by key players such as KPJ Healthcare, Columbia Asia and Sime Darby Healthcare. The projected growth in demand for quality gloves will also be affected by the recent introduction of Medical Devices Act in 2012. The new Act requires all local and imported medical devices including gloves to be registered with the Malaysian Ministry of Health (MOH) to ensure quality products are used for medical treatment and simultaneously, to legally protect medical devices registered under the country’s patent laws.

Consumption of gloves by public health institutions, 2007 – 2010

Mill

ion

Pairs

80

70

60

50

40

30

20

10

0

Surgical gloves

Examination gloves

Total gloves

66.56

51.34

15.23

68.95

53.81

15.14

70.52

55.45

15.07

72.59

55.73

16.86

2007 2008 2009 2010

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Exports of rubber products from Malaysia increased in value by 10.3% from RM12,863.3 million in 2010 to RM14,186.7 million in 2011.

Latex goods constituted 80.3% of the total export value in 2011, almost exactly the same proportion as in 2010, increasing in value from RM10,328 million in 2010 to RM11,390.2 million in 2011. Rubber gloves other than surgical gloves (primarily examination gloves) were the single largest component, accounting for 77.4% of all latex products, followed by surgical gloves which accounted for 9.4%. Other latex products of significance were latex threads and cords (7.6%), sheath contraceptives (2.4%) and rubber catheters (1.3%).

General rubber goods (GRG) constituted 6.8% of export value of all rubber products, at RM958 million, up from RM914 million in 2010, an increase of 4.8%. However, GRG exports are still below the pre-crisis level of RM978.3 million achieved in 2008. Much of the rubber products exported as general rubber goods can be categorised as non-cellular rubber in plates, sheets, strips, etc., requiring further working. It also includes some sporting goods, gaskets, washers and seals, boat and dock fenders and a variety of other rubber products such as floor mats, swim caps, etc.

MALAYSIA’S EXPORTS OF RUBBER PRODUCTS - 2011

Malaysia’s exports ofrubber products increased to a record

RM14.2 billion in 2011Table 1: Malaysia’s exports of rubber products

PRODUCTSYEAR

2008 2009 2010 2011

Latex Goods 8,404,078,604 8,338,219,334 10,327,975,685 11,390,226,393

General Rubber Goods 978,326,529 841,940,092 914,214,684 957,968,760

Tyres 829,270,362 438,524,861 546,927,193 754,079,719

Footwear 573,409,178 642,757,322 653,302,282 551,344,727

Industrial Rubber Goods 420,656,395 284,732,444 396,409,764 502,405,726

Inner Tubes 32,889,832 40,938,578 24,458,834 30,660,186

TOTAL 11,238,630,900 10,587,112,631 12,863,288,442 14,186,685,511

Tyres and industrial rubber goods also increased significantly in export value. Exports of tyres increased from RM546.9 million in 2010 to RM754.1 million in 2011, an increase of 37.9%.

Export of industrial rubber goods increased by 26.7%, from RM396.4 million in 2010 to RM502.4 million, surpassing the RM420.7 million achieved in 2008. Rubber tubes, pipes and hoses, reinforced or combined with textile or other materials, as well as plain rubber hoses were the main components of industrial rubber goods (83%), followed by conveyor belts and belting (6.4%), insulated cables and other conductors (6.1%) and transmission belts (4.5%).

In terms of export destinations, the United States was by far the most important, taking up 26.3% of exports of rubber products from Malaysia, valued at RM3,723.3 million, 3.9% more than in 2010. The US share of all rubber product exports from Malaysia, however, declined marginally, from 27.9% in 2010. Germany took second place, with 6.1% share of Malaysian rubber product exports, valued at RM859.2 million, almost exactly the same as in 2010. Japan accounted for 5.9% of total Malaysian rubber product export value, increasing to RM834.4 million from RM718.4 million in 2010. Exports to the United Kingdom also increased significantly, from RM553.1 million to RM634.3 million in 2011, making up 4.5% of Malaysian rubber product exports.

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Table 2: Traditional and developed markets for Malaysian rubber products

COUNTRY

2011 2010

Value (Million

RM)

Share of

exports (%)

Value (Million

RM)

Share of

exports (%)

United States 3,723.3 26.25 3,584.7 27.87

Germany 859.2 6.06 859.0 6.68

Japan 834.4 5.88 718.4 5.58

United Kingdom 634.3 4.47 553.1 4.30

Singapore 461.6 3.25 431.6 3.35

Australia 457.9 3.23 367.7 2.86

Italy 407.9 2.88 373.9 2.91

Belgium 330.7 2.33 296.9 2.31

France 291.1 2.05 288.8 2.24

Netherlands 277.9 1.96 237.9 1.85

South Korea 242.7 1.71 217.8 1.69

Spain 242.4 1.71 234.3 1.82

Canada 236.9 1.67 228.0 1.77

Hong Kong 215.2 1.52 215.1 1.67

TOTAL 9,215.5 64.97 8,607.2 66.9

The BRIC countries have become increasingly significant destinations for Malaysian rubber products.Brazil, with 4.0% of total Malaysian rubber product exports, declined marginally, from RM572.2 million to RM566.9 million. Exports to China increased from RM524.1 million in 2010, to RM544.3 million in 2011. Russian imports were valued at RM122.9 million, up from RM109.6 million in 2010, while India saw a jump from RM94.7 million to RM121.5 million.

Table 3: New and emerging markets

COUNTRY

2011 2010

Value (Million

RM)

Share of

exports (%)

Value (Million

RM)

Share of

exports (%)

Brazil 566.9 4.00 572.2 4.45

China 544.3 3.84 524.1 4.07

Vietnam 325.8 2.30 185.5 1.44

Thailand 285.2 2.01 220.4 1.71

Turkey 251.0 1.77 140.9 1.10

Indonesia 208.1 1.47 163.2 1.27

Mexico 138.3 0.97 100.5 0.78

Argentina 127.5 0.90 134.8 1.05

Russia 122.9 0.87 109.6 0.85

India 121.5 0.86 94.7 0.74

UAE 121.3 0.85 113.5 0.88

Saudi Arabia 117.8 0.83 80.4 0.63

South Africa 107.2 0.76 97.6 0.76

Poland 97.5 0.69 86.7 0.67

TOTAL 3,135.3 22.12 2,624.1 20.4

Exports of rubber products from Malaysia to emerging markets including Vietnam, Thailand, Turkey, Indonesia, Saudi Arabia and Mexico, also saw significant increases,not only in terms of value but also in share of total exports. It is noteworthy that Malaysian exports of rubber products to non-traditional markets grew by 19.5% to RM3.1 billion in 2011 from RM2.6 billion in 2010. New and emerging markets constituted 22.1% of total exports of rubber products from Malaysia in 2011, up from 20.4% in 2010.

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RUBBER PRODUCT SMES - PRIMED FOR GROWTH

SANCTUARY HEALTH SDN BHD– Products for the world

The company now employs about 70 workers, with over 50 employed on the factory floor, while the rest are sales and office personnel. The bulk of workers are local, with only about 20 foreign workers. The factory is fully integrated, and operates latex sheeting lines with on-line printing, latex dipping tubing machines, automatic cutting machines, and silk screen printing machines. It has full waste water treatment facilities, R&D facilities, and in-house sampling and testing facilities. Products are also tested at independent laboratories to ensure that customer specifications are met.

S mall and medium enterprises (SMEs) comprise almost 85% of the companies involved in rubber product manufacturing in Malaysia. Most of them

manufacture general rubber goods for the domestic market, supply replacement parts for local industries and provide component assemblers with relatively simple products. Some have ventured into supplying OEM parts to local automotive manufacturers and assemblers, and to manufacturers of electrical and electronic products. A few are export oriented, often focussed on supplying products to niche markets or manufacturing specialty products for well known brands.

This and the next issue of STRETCH will look at some SMEs involved in rubber products manufacturing and examine how these firms are coping with the challenges of functioning in a competitive environment, locally and in international markets.

Malaysia’s SME Corp identifies three categories of SMEs in manufacturing, manufacturing-related services and agro-based industries, i.e.:

Micro enterprises– with sales turnover of less than

RM250,000 or less than 5 employees;

Small enterprises– with sales turnover between

RM250,000 and RM10 million or between 5 to 50 full-time employees;

Medium enterprises– with sales turnover of between RM10

million to RM25 million or between 50 to 150 full-time employees.

Sanctuary Health Sdn Bhd is a relatively new company, which has grown rapidly over the last few years. It was established in 2004 by Mr. Koh Yek Joo, initially as a one-man show to trade in rubber products. In April 2005, a factory to manufacture rubber exercise bands was set up in Perak. Mr. Koh, whose background was in banking, joined forces with Mr. Steven Quek, who has experience in the rubber industry, to establish the manufacturing facility at a family owned property. For the first few years, the focus was on supplying rubber exercise bands to private labels, to service a few established customers, and build a reputation for reliability and quality.

In 2010, the manufacturing as well as the administrative and sales activities relocated to a new factory in Chemor, Perak, at a cost of over RM3 million.

Mr. Koh Yek Joo, MD of Sanctuary Health

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Exercise bands (also known as “resistive bands”) of varying levels of resistance are the company’s main product, accounting for about 50% of sales volume, followed by dental dams (25%) and exercise tubings (25%). All the products are made from natural rubber latex, although some experimental work is being done on synthetic rubber products to address the requirements of customers.

Sanctuary Health manufacturing plant in Chemor, Perak

Inspection and packing of exercise bands

In 2011, total sales revenue was around RM8 million, a far cry from the early days when the company was struggling to find its footing in a niche industry, where quality and reliability were primary concerns. The United States continues to be the most important market for the company, with about 40% of sales. This is followed by Europe, where Germany is the main destination. Malaysia, Thailand and Singapore are also significant markets and efforts are being made to enter new markets such as India and the Middle East.

Although there are not many suppliers of rubber products for physiotherapy, rehabilitation and fitness, the competition is fierce as it is a relatively “closed” industry, with a limited number of buyers and distributors. To compete effectively, Sanctuary Health has moved to set quality standards well ahead of its competitors. Research and development activities are directed to improve product quality, from developing powder free and low protein products, improving appearance and developing accessories such as handles for the exercise bands and tubings, to developing consistency in resistance for the range of products marketed. The manufacturing facility is certified to ISO 9001:2008 and EN ISO 13485:2003+AC:2009 and the products have obtained CE certification and FDA approval as Class 1 products. However, as the new boy on the block, Sanctuary Health has to market its products aggressively to grow its market share. To this end, Mr. Koh and his team travel extensively, participating in trade fairs and exhibitions all over the world.

Using exercise bands

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To reach end-users without a well known brand is an uphill task, but it is a task that Sanctuary Health has embarked upon, with its Sanctband brand for exercise belts and tubing and Sanctuary for dental dams. Although currently almost 80% of sales are to private labels, Sanctband exercise bands and tubings have begun to be accepted, making up 10% of sales and Sanctuary dental products another 10%.

The Managing Director, Mr. Koh, is focussed on marketing a range of products to the fitness market, where customers are the big name sporting goods companies, as well as educating medical institutions and practitioners on the benefits of using resistive exercise bands and tubing to strengthen muscles and increase flexibility in physiotherapy and rehabilitation. Brand development is high on his priority list, particularly in new and emerging markets where established brands are less well known.

Youngman Development is the only company in Malaysia that manufactures rubber balls for a variety of games. The company makes soccer balls, basket balls, volley balls, American footballs, playground balls, medicine balls, toy balls, almost any kind of rubber ball that may be needed by customers. The balls come in a wide range of sizes, from a diameter of 2.5 inches to as large as 16 inches, and a variety of weights, finishes and colours. Most of the balls, as much as 95%, are exported.

Youngman Development was set up by Taiwanese investors in 1992, with local partners, including rubber compound suppliers. The company was bought over by the Malaysian management team in 2003. The present Managing Director, Mr. Tee Kok Thong, has been the driving force behind the company since its takeover, with a young management team that oversees day-to-day operations at the factory in Jenjarom, on the outskirts of Banting, in Selangor.

YOUNG MAN DEVELOPMENT (M) SDN BHD– Focussed on exports

Exercise tubing

Completed balls ready for packing

Resistive exercise bands

Sanctuary Health is working on growing the market for its products by introducing rubber exercise products to end-users as well as therapists and orthopaedists and increasing the range of products marketed. At the same time, with its focus on quality and aggressive marketing, the company is working on expanding its market share in new and existing markets, with its own brands as well as private labels.

The company has a paid-up capital of RM8 million, covering land, factory buildings and equipment. Although the management buyout was for considerably less than the paid-up capital, the new management was faced with the challenge of turning the company around and making it profitable. The economic downturn in 2009 was a particularly difficult time for the company,

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made even more daunting with the increase in prices of rubber raw materials. Fortunately, the new management team had some experience in rubber compounding and rubber products manufacturing and strong linkages to a rubber compound supplier, which helped to keep losses to a minimum and the company afloat till the turnaround in 2011.

The company has the capability to design balls to meet the needs of customers, making changes to ball construction, material used, and surface printing to suit specific users and purposes as may be required. Generally, balls have a three-stage construction, with an inner bladder of natural rubber, a layer of thread wound around the bladder and dipped in latex, and an outer casing which is textured and printed or painted to customers’ specifications. Most of the design work goes into the outer layer, which can have different textures, varying degrees of hardness, and of course, different colours and print designs. Different materials, including natural rubber, SBR or EPDM, may be used for the outer casing, depending on the requirements.

The compounds for the manufacture of the bladders and the outer casing are sourced externally from a nearby compounder or from other suppliers, though some mixing can be done in-house if outsourced compounds need to be modified to suit a specific characteristic required by the customer. In-house printing facilities enable the team to design and prepare their own decals for transfer to the finished balls. About 130 workers are employed at the factory.

Mr. Tee Kok Thong, MD of Youngman Development Thread being wound round the balls before latex dipping

Currently, the company is looking at expansion opportunities, in terms of increasing production capacity and tapping new markets. In 2011, total sales revenue was in excess of RM11 million, with the bulk of exports going to the United States. Youngman Development’s regular customers include suppliers to big name sports brands, major supermarket chains and amusement parks. The company also manufactures made-to-order balls in smaller numbers for promotional events and for customers who wish to have specific designs.

Sales to local customers are somewhat limited, mainly of balls with special designs that are used for promotional events and as give-aways by companies that place one-off orders from time-to-time. Stiff competition from cheaper balls, generally of lower quality, from China, makes the domestic market less attractive.

Mr. Tee and his team are constantly looking at ways to enhance the products that they market. They have developed an eco-ball, using recycled materials, such as tire chips, and glow-in-the-dark balls, for use as novelty items. They also have plans to explore new markets, targeting Europe for possible expansion of their OEM marketing. To increase production capacity and price their products more competitively, they also need to look at possible areas of automation, to reduce their dependence on foreign labour.

1414

Set up in 1995, with just 3 manually operated compression moulding machines, Altoraba Industries primary business is to supply rubber automotive parts to Malaysian automobile manufacturers, either directly or as a second tier supplier. While the company is dependent on local car manufacturers Proton and Perodua for a significant portion of sales, Mr. Kamaruzaman Md Hashim, the Managing Director and Ms Maria Abd Hamid, the Executive Director, have been looking at ways to diversify the products Altoraba manufactures, to explore new markets and to expand production.

In 1996–97, with internal funds as well as some investment from PUNB (Perbadanan Usahawan Nasional Berhad) Altoraba acquired new Taiwanese compression and injection moulding machines and moved to their present premises in Shah Alam. Today, Altoraba employs 28 workers, and has annual sales of about RM3 million. The company has obtained ISO/TS16949 and ISO 9001certification.

With an eye on expansion and diversification, Altoraba has ventured into manufacturing rubber parts for the electrical and electronic industries, such as cable joints and keypads, moulded parts for motorcycles, as well as a wide range of other moulded rubber and metal bonded products. These include rail pads, rubber sheets for bullet proof vests, rubber bollards, rubber bases for sign posts and other products according to customer specifications. Notably, Altoraba has supplied rail pads for the Ipoh – Rawang double tracking project, and has undertaken some exports through components suppliers.

Product development is done using in-house expertise, working with local universities, Technology Park Malaysia, and the Malaysian Rubber Board to develop specific compounds for the products. Compounds are outsourced, after the customer’s requirements have been met and the specific formulations determined. As many of the products the company manufactures are developed to meet specific customer requirements, much time and effort is spent on working on new

products, often for small orders. This works out fine if the customer bears the cost of development as well as the cost of moulds. However, when a product is developed and then the order received is too small to cover the tooling costs, the management may have difficult decisions to make on whether to proceed in the hope of further orders or to decline the order.

Currently, Mr. Kamaruzaman and his team are making efforts to expand markets either through exports to buyers in the region or through tie-ups with companies with similar interests in ASEAN. Thailand, Indonesia and Vietnam are countries being explored and where contacts are being developed. Supplying rubber automotive parts to domestic automobile and motor-cycle manufacturers and, to a lesser extent, to the replacement market, remains the core of the business, but there is interest in developing higher value products to meet the requirements of specific customers.

ALTORABA INDUSTRIES SDN BHD– Striving for growth

Mr. Kamaruzaman Md Hashim, MD of Altoraba

Inspection and packing of exercise bands

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Rubber base for a plastic bollard

Expansion and development of new products is constrained by the company’s financial limitations. Funds for developing new designs and testing compounds and prototypes, where returns are not yet assured, are limited for small companies such as Altoraba; even when designs have been accepted by a customer, fabricating moulds is a critical expense, if there is no assurance of repeat orders.

Despite these drawbacks and constraints, the management at Altoraba remains committed to developing new designs and new products, and to work towards meeting their customers’ expectations.

The MREPC Incentive Programme

The MREPC Incentive Programme provides financial assistance to aspiring and current exporters of Malaysian rubber products to promote their products in the international marketplace.

Administered by MREPC, the scheme supports a wide range of export promotion activities and is designed to encourage Malaysian rubber products manufacturers and exporters, especially small and medium-sized businesses, to develop and expand export markets.

For more information on MREPC Incentives, go to http://www.mrepc.com/incentives/Incentives2011.php

Production of Promotional Materials

SBIM 8, for Production of Promotional Materials, is an incentive under the MREPC Incentive Programme that provides financial assistance to companies for the production of materials promoting rubber products from Malaysia.

Under SBIM 8, Malaysian rubber product manufacturers can claim 50% of expenditure to produce a wide range of promotional material(s), subject to a maximum claim of RM10,000 per company per year.

Rubber product manufacturers and exporters may apply for this incentive when they produce brochures, flyers, leaflets, buntings, banners, posters, folders, booklets, catalogues, display stands, paper bags, videos, CDs, or other materials for marketing and promotion via internet, radio, bill boards, print advertisements or other media.

For more information on this MREPC Incentive, including how to apply, frequently asked questions and application forms go to http://www.mrepc.com/incentives/Incentives2011.php#8 or contact MREPC.

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RUBBER PRODUCT TRADE STATISTICS - 2011

Major Destinations for Malaysia’s Rubber Product Exports (RM’000)

Country January–December2011

January–December2010

% Change % Share (2011)

EU-27 3,723,305 3,584,670 4 26.25

USA 3,601,860 3,342,221 8 25.39

ASEAN 1,413,999 1,134,473 25 9.97

Japan 834,378 718,355 16 5.88

Brazil 566,864 572,204 -1 4.00

China, P.R. 544,294 524,116 4 3.84

Australia 457,965 367,702 25 3.23

Turkey 251,015 140,871 78 1.77

South Korea 242,699 217,834 11 1.71

Canada 236,902 228,004 4 1.67

Hong Kong 215,206 215,120 0 1.52

UAE 121,249 113,466 7 0.85

Subtotal 12,209,736 11,159,036 9.4 86.1

World Total 14,186,685 12,863,289 10.3 100

Source: Department of Statistics, Malaysia

Malaysia’s Exports and Imports of Rubber Products (RM’000)

Exports Imports

2011 2010 2011 2010

January 1,072,198 1,017,347 291,462 270,484

February 978,449 919,712 246,124 223,067

March 1,304,658 1,112,863 332,316 280,390

April 1,209,301 1,122,967 299,670 275,287

May 1,124,551 1,031,098 326,888 293,300

June 1,198,878 1,051,160 348,908 317,533

July 1,256,276 1,137,104 337,991 322,944

August 1,227,400 1,114,807 346,738 287,657

September 1,149,731 1,009,707 325,907 287,005

October 1,207,762 1,111,133 353,629 276,479

November 1,140,614 1,024,686 340,021 267,790

December 1,316,867 1,210,705 351,635 320,272

January–December 14,186,685 12,863,289 3,901,289 3,422,208

% Change(January–December) 11/10 10.3 14.0

Source: Department of Statistics, Malaysia

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Discussions in the MREPC stand at Auto Expo 2012 MREPC staff attending to a visitor at Arab Health 2012

The Arab Health Exhibition is the largest healthcare event in the Middle East and the second largest in the world. The 37th Arab Health Exhibition in January 2012 saw over 3,000 exhibitors from 60 countries showcasing their products and services to an estimated of 65,000 trade visitors. Six rubber medical product manufacturers from Malaysia participated in Arab Health this year at the MREPC Pavilion, promoting Malaysian-made rubber medical devices, including SMG certified gloves.

Business matching sessions arranged by MREPC were well received by the participating manufacturers. A major portion of the inquiries received were for examination and surgical gloves, primarily those made of NR latex. There was significant interest in Malaysian-made condoms and catheters. Visitors were mostly from Middle Eastern countries (mainly from UAE, Saudi Arabia and Egypt) but Pakistan, India and European countries were also well represented.

Auto Expo 2012, which was held at the Pragati Maidan, New Delhi, focussed on technological advancements and innovative designs, particularly in relation to automobile safety and environment friendly vehicles. With around 1,500 exhibitors from 23 countries and more than 1.2 million total visitors representing over 100 countries, this biennial event is Asia’s largest automotive show highlighting the latest automotive products, components and vehicles.

MREPC’s first ever participation in Auto Expo 2012, with three Malaysian rubber automotive part manufacturers, featured a wide range of rubber automotive parts such as hoses, mountings, bushings, boots, seals, o-rings, weather-strips and profiles. Trade enquiries received during the show were from India and neighbouring countries such as Pakistan and Nepal. MREPC arranged business matching meetings for the participating manufacturers with five Indian based companies. The trade show was followed by a working visit to two Indian automotive companies and an Indian association of parts manufacturers to explore their sourcing needs for automotive components.

MARKET PROMOTION ACTIVITIES

AUTO EXPO 2012,New Delhi, India7 – 11 January 2012

Arab Health Exhibition,Dubai, UAE23 – 26 January 2012

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The 18th Medical Fair India was held at the Bombay Convention & Exhibition Centre. With a total of 311 exhibitors from 16 Countries and about 5000 trade visitors, this is the premier medical trade exhibition in India. The prominent MREPC pavilion, with 7 Malaysian rubber medical devices manufacturers, attracted much attention. Though most visitors’ were interested in examination and surgical gloves, there were a number who inquired on foley catheters, condoms, exercise products and other rubber medical devices.

MREPC presented a paper entitled “Importance of Selecting the Right Medical Gloves for Infection Prevention: What You Need to Know” at the conference which was held concurrently with Medical Fair India. The paper was well received by the audience of medical regulators, hospital administrators and medical practitioners. Participation at Medical Fair India was followed by working visits to dental clinics in and around Mumbai, with a view to assessing the market for gloves and other rubber devices related to dentistry.

MREPC participated for the first time in SALMED, the International Trade Fair for Medical Equipment and Instruments, from 14 to 16 March 2012, at the Poznan International Fair (MTP) grounds in Poznan, Poland. The MREPC booth functioned as a centre for trade visitors looking for medical gloves and other rubber medical devices made in Malaysia. Staff manning the booth also sought to provide healthcare professionals with information on rubber medical gloves.

Besides participating in the exhibition, business meetings were held with foreign buyers who had been contacted prior to the exhibition by MREPC Europe office. A talk on “Medical Gloves: What You Need to Know” was presented by the MREPC Europe representative.

SALMED 2012 attracted an estimated 300 exhibitors from 21 countries, who showcased their products and services. There were an estimated 6,000 professional visitors during the 3-day fair. The majority of trade enquiries received were related to medical gloves (surgical and examination), with some interest in rubber catheters, probe covers and other rubber medical devices.

Medical Fair India 2012,Mumbai, India2 – 4 March 2012

SALMED 2012,Poznan, Poland14 – 16 March 2012

The bright and prominent MREPC pavilion MREPC staff with visitors to the booth at SALMED

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Three papers were presented at the seminar on the Market for Rubber Automotive Parts in India and South East Asia. Ms Yap Siew Hong, the Director of the Corporate Planning and Research Division at MREPC, presented a paper on Rubber Automotive Parts in South East Asia, outlining the research findings from a study commissioned by MREPC, and Mr. Izwan Zarik, Deputy Director of the Division, presented a similar paper on the Indian market. Puan Hazrina Hassan Khalep, Head of Corporate Division in the Malaysian Automotive Institute (MAI) gave an overview of the national automotive policy and outlook for energy efficient vehicles.

The seminar, which was attended by Malaysian rubber automotive parts manufacturers, highlighted opportunities in the domestic as well as regional markets for rubber automotive parts, for products that are able to meet the requirements of the original equipment as well as the replacement markets.

Seminars & WorkshopsAT MREPC

Participants listening attentively to the speaker

Participants with the speaker,Mr Sharif Hambali (centre)

Market Updates on Rubber Automotive Parts in India and Southeast Asia

31 January 2012

Understanding the Basics of Employment Act, 1955, and Staff Performance

21 February 2012

Malaysia’s Medical Device Act 201215 February 2012

Mr Ahmad Shariff Hambali, the Principal Assistant Director and Head of the Premarket Evaluation Branch of the Medical Device Control Division in the Malaysian Ministry of Health presented information on the implementation of the Medical Device Act 2012 in Malaysia to rubber medical device manufacturers and exporters. The seminar included an overview of the regulatory framework for medical devices in Malaysia and the scope of the new regulations. Aspects such as risk-based classification and regulatory control of devices, conformity assessment, registration and licensing procedures, and the timeline to move to the mandatory phase of implementation were dicussed. Participants showed keen interest in the implementation proposals and gained much from the seminar.

A seminar on the Malaysian Employment Act of 1955 and how this affects employer – employee relationships in Malaysia was held at MREPC, to bring Malaysian rubber product manufacturers up to date on current issues related to workers and their rights. The presenter, Mr. Shawn Sher, the CEO of Lyons Shers Incorporated, used case studies effectively to provide some important insights into handling difficult employees, with particular reference to the Malaysian environment. Participants learnt that Malaysia has among the most pro-worker legislation in the world and that dismissal of employees has to be handled with extreme care. The seminar also discussed on ways of managing difficult employees to minimise the need for dismissals and to improve staff performance.

Role play at the Seminar on Employment Act and Staff Performance

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3 words inspire confidence

Made in Malaysia

www.mrepc.com www.smg-online.biz www.latexglove.info

For quality rubber automotive components that meet stringent international standards, look to Malaysia. No one knows rubber like Malaysia does.

MALAYSIAN RUBBER EXPORT PROMOTION COUNCIL