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Counting on diversification to spring ahead
HOMEGROWN rubber and foam component manufacturer Armstrong Industrial Corporation may not be a household name, but its products are found in everyday appliances - from air-conditioners and laptops to cars.
As a noise, sound and vibration management specialist, the company makes customised parts serving customers in a variety of industries such as automotive, consumer electronics and data storage.
Notably, these customers include multi-national brands like Sony, Mercedes-Benz and Daikin.
Armstrong deputy chief executive officer Phyllis Ong says: "Anyone in the world today probably owns an Armstrong product; it is just that they don't know it."
And this diversified portfolio is what the precision engineering company - which was founded in 1974 - believes sets it apart from its competitors.
"There's no other strong player like Armstrong that offers this cross-industry knowledge, and our customers do value that because we can give them different ideas and perspectives," Ms Ong notes.
In 2015, the company posted a revenue of S$220 million, which rose to S$230 million in 2016, and climbed further to S$250 million last year.
Ms Ong attributes this increase to the growth of Armstrong's key clientele, many of which are established market leaders.
About half of the company's business came from the automotive industry, while consumer electronics, data storage and other industrial products contributed the remaining half.
The company also registered a net profit margin of 7-8 per cent last year, which it deems as "sustainable".
DELISTING AND MODERNISATION
But Armstrong's journey has not always been smooth sailing.
In 2014, the company chose to delist from the Singapore Exchange, after spending almost 20 years on the mainboard.
Gilbert Ong, chairman and chief executive officer of Armstrong, who is also Ms Ong's father, says: "We did not raise funds for further expansion at that time, and we felt that it was not meaningful to remain listed."
Additionally, Ms Ong adds that a lot of time and effort had to be put in place to meet the reporting requirements.
But the delisting has not affected Armstrong's fundamentals, according to Mr Ong. Instead, the 44-year-old company focused on adapting to modern and disruptive trends.
For example, while smartphones got larger and denser, they also generated heat faster. As such, Armstrong had to re-examine its processes and materials, and make adjustments so its parts could transmit the heat away.
Similarly, the growing popularity of electric cars - which produce low heat compared to conventional vehicles - led to Armstrong developing new materials that could provide better thermal insulation for car batteries.
Because of the company's long-established relationships with different customers, Mr Ong explains that Armstrong's workers are able to learn about these new trends and synthesise innovative solutions.
Ms Ong adds: "Portfolio management is part of our strategy. We are conscious that we don't focus on only one product type, one industry or one country."
Beyond adapting to changes in industry requirements, the company has also decided to diversify further.
It started planning for a new division called Armstrong ATOMIC (Answers for TOMorrow Innovation Centre) two years ago, with the aim of penetrating the medical and healthcare industry.
Ms Ong shares: "The medical business has always been something Mr Ong has considered for years. However, this industry is well-protected. So, we tried to find ways to work on this segment in another way, other than just being a supplier."
She explains that the medical and healthcare industry was chosen because it was an area that aligned with the government's vision of high-value creation for the Singapore-based manufacturer.
Moreover, while Armstrong's existing industries appear different from the medical industry, she points out that there are a lot of similarities, particularly in the processes and material know-how.
For instance, because Armstrong makes hard-disk parts, the company knows how to operate a clean room - a controlled environment free from dust and other contaminants. Such a facility is used for the manufacture of various medical devices as well.
Eventually, the approach the new division took was to invest in and work with biotech startups. For example, one such startup is Collagreen, which recycles waste from local frog farms into high-value collagen.
"We want to co-own intellectual property (IP) rights and develop products," Ms Ong says.
According to her, it was difficult to do so with larger established companies that would view them as another supplier.
At the same time, Armstrong could also provide much-needed material know-how to those startups.
Armstrong's efforts wooing startups did not go unnoticed.
Earlier this year, the company was selected as one of the nine co-investment partners of Seeds Capital, the investment arm of statutory board Enterprise Singapore.
In the long run, Armstrong aims to make the healthcare and medical industry as part of its core within the next five to 10 years, says Ms Ong.
On this front, the company is building a bio-material lab, finding more startups and hiring scientists.
At the same time, the company is continually developing new technologies and materials for its existing industries.
Mr Ong believes that Armstrong will be evergreen, and that it is here to stay. "As long as we innovate, we will keep going. We cannot stay still."
He also credits his staff as a key factor that motivates him to stay in the business.
Ms Ong explains: "I always say that I am the eldest, but his (Mr Ong's) eldest child is really Armstrong, which is two years older than me. He spends so much time here, this is his baby."
She adds: "And for many of the staff who have been with him for 20 to 30 years, they too feel that he is their father in many ways. He will guide them, scold them, and teach them how to be future-ready."