BMCs-Best Execs-r2:AMM grid in qxp 12/24/09 9:42 AM Page 46
AWARDS
ancesheetandfreecashflow.Alongoperatinghistoryalsoofferedreas- INDIA
surance.Thisyear’slarge-capwinnerhasallthreeinspades.
ConsumergoodsexporterLi&Fungboastsaheritagethatdatesback SMALL-CAPCORPORATEOFTHEYEAR
morethanacentury.Itactsasamiddleman,sourcingsoftandhardcon- McLeodRussel(India)
sumergoodsfromOECDretailersandmanagingthemanufacturingsup-
plychain.
Li&Fungstrengtheneditsfinancialpositionduringthecrisis.Inits ThenameMcLeodRussel(India)maynotbefamiliartomostreaders,
interimfirst-halfresults,thefirmrevealeditsnetdebthaddecreasedto butmanywillhaveconsumeditsmainproduct.
HK$2.6billion,fromHK$4.2billioninthefirsthalfoflastyear.Italsohad TheIndianfirmistheworld’slargestteaplantationowner,with
acashbalanceofmorethanHK$3billion. the75millionkilogramsofteaitproducesayearaccountingfor
Impressivelyitreducedselling,generalandadministrativeexpenses around8%ofIndia’steaproduction.
(SSGA)byHK$222millionyear-on-year.Andmanagementindicatedthat Analystspraisethecompanyforanunwaveringcommitmentto
itwasontracktomeetits10%cost-cuttargetin2009,whichwouldbea quality,alongwithanacquisitivemindsetthathasseenitrapidlybuild
considerableachievement. itsbusinessinIndiaandbeyond.
Thiscostreductionhelpedtooffsetnegativesalesgrowth,andthefirm McLeodRusselensureshigheryieldratesthroughare-plantation
reportedfirst-halfearningsofHK$1.4billion,whichwasaheadofconsen- policyinwhichitreplants2%ofitsbusheseveryyear,allowingitto
sus. chargehigherpricesthanpeers.
“Iwouldsaytheyhavedeliveredontheirtargets,”saidoneanalyst.“If Thecompanyhashadagoodyear.Earlyin2009,Kenya,thelargest
anythingitwasunfortunatewehadadownturnatthistime,becauseit exporterofblacktea,reportedthatproductionfell16%duringthe
looksasifLi&Fungistakingadvantageofthedownturntolaypeopleoff firsteightmonthsof2008.
andcutcosts,butthetruthisitwasplanned.” Thenewshelpedtofosterarallyinteaprices.Addtothisthefact
Butthecompanydidnotfocusonbalancesheetmanagementtothe thatthatIndia’steacropalsosufferedshortagesthisyearandthattea
exclusionofexpansion.InthefirsthalfLi&Fungcompletedthreesmall consumptionisgrowingbyroughly3%ayear,andMcLeodRusselhas
acquisitionsforatotalofaboutUS$100million.Italsoenteredintoa enjoyedstrongmomentum.
long-termbuyingagencyagreementtoactastheprimarysourcingagent KKBaheti,adirectoratthebusiness,saidonDecember4thatthe
forallbrandsintheLizClaiborneportfolio. companyhopedtogeneraterevenuesofRs2billion(US$43million)
AndinOctoberitannouncedtheacquisitionofWearMeforabout forthefinancialyearendinginMarch2010,versusRs828millionin
US$402million.WhilequestionsremainoverLi&Fung’sacquisition salesthepreviousyear.ItsnetprofitbetweenJuneandSeptemberwas
efforts,withanalystssuggestingitmayhavemissedopportunities,itis almostsixtimesthatoftheprecedingquarter.
expectedtoclosemoredealsinthenearterm. Meanwhile,thecompany’ssharepricehasrisen500%thisyearto
Rs253.05.
Overthepast18monthsithasexpandedoutsideIndia,acquiring
BESTEXECUTIVE PhuBenTeainVietnamforUS$7millionandspendingUS$2.75mil-
RaymondLee,chiefexecutive,Lee&ManPaperManufacturing liontobuya75%stakeinOlyanaHoldings,whichinturnowns60%
ofateaplantationinRwanda.
Byincreasingitssize,McLeodRusselwillgainmorebargaining
Itwouldbehardtobemuchmorehands-oninabusinesssensethan power.Foracompanyalreadyenjoyingstrongearningsmomentum,
RaymondLee,theproactivechiefexecutiveoffamily-runfirmLee&Man thatcanonlybeagoodthing.
Paper.
Thegroupmanufacturesandsellspaperandpulp,anditsproducts
includecorrugatedboardandcartonboxes.Italsoprocuresrawmateri- MEDIUM-CAPCORPORATEOFTHEYEAR
als,providingmanagementandtreasuryservicesandinvestmenthold- DrReddy’sLaboratories
ing.
ThebusinessbuysmaterialfromtheUSandEuropeandhasfiveman-
ufacturingplantsinChina.Assuchitisexposedtotheexportsectorandis Indiahasseizedanincreasingsliceoftheworld’spharmaceutical
verysensitivetochangesintheUSandEuropeaneconomies. industryasitsmanufacturersproducecheapergenericdrugsthan
Theindustrydownturnlastyearsawthecompanyincurlosses.Lee developedcountryrivals.DrReddy’sisastand-outexample.
reactedquicklybyslowingdowncapitalexpenditureandfocusingon Someanalystshavefeltthatthefirmhasnotalwayspaidthe
strengtheningthebalancesheet,drivingthefirm’sgearingratiodown utmostattentiontocorporategovernanceandthatithadgrownalit-
fromover85%to66%bytheendofSeptember. tlestale.
Hehashelpeditsnetmargintorecovertonear-recordlevels,andin ButinMarchDrReddy’slaunchedfivenewgenericdrugsintothe
thefirsthalfofthisyearLee&Manreportednetprofitgrowthof22%.It US,whileinMayitconductedaninternalrestructuringexerciseto
achievedallthiswithoutraisingasinglecentintheequitymarket,unlike promoteefficiencies.
rivalNineDragonsPaper,whichraisedUS$370millionfromatop-up Theseeffortshavebornfruit.DrReddy’ssalesfortheninemonths
placementinOctober. endingSeptemberwereRs56.4million,comparedwithRs46.8billion
AnalystsnotethatLeeisproactiveintermsoftravellingtomeet thepreviousyear.ItenjoyedsalesgrowthintheUS,RussiaandIndia.
investorsandtryingtounderstandthemacroeconomicpictureinorderto Thecompanyhasbeeneagertotellthemarketitistargetingrev-
makebetterinvestmentdecisions. enuegrowthof10%forthefinancialyearendinginMarch,alongwith
OneanalysttoldAsiamoney:“HehasspentalotoftimeinChinatotry areturnoncapitalemployedinthemid-to-highteens.
andunderstandthewholeindustrydynamicand[government]policy Analystsbelievethesefiguresareachievable,andinvestorsseemto
direction.Whenwespoketohimaboutwhatwashappeningintheindus- aswell.DrReddy’ssharepricehitRs1,103.05onDecember11,more
try,hewasontopofeverything. thandoubleitsvaluationatthestartofJanuary.
“Hecantalkaboutthebusinessingreatdetailandheisveryhonest Butnoteverythingwentwithoutahitch.Thecompany’soperations
withhisviews.Post-financialcrisisIthinkthecompanyhasneverstopped inGermanyareperformingpoorly,anditneedstoraiseitsgamein
speakingtoinvestors,andfromananalyst’sperspectivethishasbeenvery north-eastIndia.ItalsowithdrewfourproductsfromtheUSmarket
muchappreciated.” aftersomewerefoundtocontainoversizedtablets.
46 DEC2009/JAN2010 ASIAMONEY
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