(Source: www.sgsme.sg)

KODA Limited, an original equipment (OEM) and original design manufacturer (ODM) specialising in household furniture, has undergone massive operational restructuring and changes in its business model since the 2008 financial crisis.

It is now focusing on growing its retail and distribution arm, Commune, in the Chinese market.

In the group’s first media briefing in years held on Monday, deputy chairman and managing director of Koda, James Koh, said the financial crisis was a particularly difficult time as the US was Koda’s biggest market at the time.

“Where our customers used to order, for example, 50,000 units of a particular chair, today they might only order 50 units. It has become a very conservative market.”

Mr Koh explained that over the last few years, the company had been streamlining its operations and removing unprofitable aspects of it.

In an SGX filing, Koda said it had consolidated its production facilities in Vietnam, relocated unprofitable factories in China, disposed certain non-core assets for cash, as well as its loss-making Vietnamese unit Rossano.

The group also said it improved its supply chain efficiency, enhanced its product mix, and has expanded the distribution of Commune, Koda’s wholly-owned subsidiary.

Mr Koh said this does not mean a reduction of Koda’s core ODM and OEM business, which still supplies furniture to the US market. It still accounts for more than 30 per cent of total revenue for FY2016, according to the SGX filing.

Focusing on the branding and design of Commune was one of the group’s main strategies for managing its long-term growth.

Commune CEO Joshua Koh said: “We maintain a strong design focus. If you walk through any of our stores, you’ll notice we offer a very unique shopping experience. We target the growing middle-class segment, where they tend to live in small spaces, and who have started new families.

“Because of our manufacturing background, we can offer products at very affordable prices.”

At present, Commune has four stores in Singapore, three in Malaysia, one in Australia, and 35 in China. The group’s vice-president of group sales and marketing Gan Shee Wen said the four stores in Singapore are owner-operated stores, while all other stores outside of Singapore are distributor-retail stores.

He added that there were 12 more distributor-retail stores under renovation in China, and they will be completed by the end of next month.

The group’s future expansion will be driven by a rollout of the distributor-retail network. “To expand rapidly, we do not ask for a high franchise fee from our distributors. And for markets with strong franchise laws, we don’t ask for royalties,” Mr Gan explained.

Commune is also looking to expand into e-commerce, with plans to utilise WeChat in the Chinese market.

Koda chief financial officer Lim Swee Hua said the group’s financials have been doing well in lieu of the group’s restructuring since the financial crisis.

Its 3Q gross profit for the three months ended March 31, 2017, rose by 53.4 per cent from US$1.96 million (S$2.68 million) to US$3.32 million (SS4.54 million).

Q3 profit after tax experienced a more than five-fold increase from US$59,000 (S$80,700) to US$325,000 (S$445,000) compared to the year-before period.

The counter rose by 15 Singapore cents or 15.8 per cent to close at S$1.10 on Monday.

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