3. RISK FACTORS 3.1 Business Risks
Risk from Over-Reliance on a Few Major Customers The Group places importance on and continues the expansion of its food and beverage packaging products, which has high market demand. This results in increasing revenue from this line of business. At the same time, the Company has been attempting to reduce orders of automobile parts and electrical appliances. As a result, in 2013, the proportion of income from the food and beverage packaging products made up approximately 30% of total Group’s sales, with the tendency to continue to grow with its higher rate of sale growth compared to other product groups. At present, sales from the food and beverage packaging products are generated from to 3 to 4 major customers in the food and cinema industries and 4 to 5 in the beverage industry, who have contracts with the Group. This is not a large number of customers. Meanwhile, there are many competitors in the food and beverage packaging industries, and there remains a chance that these customers may not extend their contracts with the Group and switch to competitors. In case the Group loses its current customers and cannot immediately replace them with new ones, this will affect the consistent and continuing income generation, or result in lower income for a while. Nevertheless, the Group’s products have their strength in patent and quality as they are produced with modern and efficient technology, such as the in-mould labeling technology that requires fewer raw materials but produces durable and beautiful products, and the patent on closure which also requires fewer raw materials, making it light-weighted. This helps reduce costs and promote CSR activities for customers. The Company has received the rights to sell and produce products under the aforementioned patent in 14 countries. As a result, the Company has a stable financial foundation and is ready to invest in the food and beverage packaging products that requires high-value machinery and production equipment. With this reason, the Company is confident that its food and beverage packaging products can compete in the market very well, and it is difficult for any new comers to compete with. However, the Company is not complacent and has laid out approaches to handle risks as follow:
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1)
Maintain good relationship with both current and potential customers from whom the Company is not able to take orders due to our limited production capacity. This is one of the reasons why the Group only takes large orders from a few major customers. The Company maintains its customer relations by providing the knowledge and production assistance when there is an opportunity or when necessary;
2)
Increase production output by investing both domestically and abroad and/or by improving the production process to increase its production capacity;
3)
Consider extension of sale contracts when there is an opportunity and carry out negotiations with customers;
4)
Jointly research and develop products with customers, raw material producers and mould-makers in order to have products that meet the needs of customers;
5)
Organize regular marketing campaigns to promote the strengths of the products particularly by encouraging participation in environmental preservation activities in order to further enhance the brand’s reputation in the public;
Annual Report 2013 Srithai Superware Public Company Limited