Conquering the global market

By Sherilyn Goh

From hitting rock bottom where production was slashed by half during the subprime mortgage crisis, Seah Kian Hoe persisted out of a sense of responsibility, and was quick to shift his focus to other markets. Thirteen years into the business, the entrepreneur is not slowing down and has bigger plans to conquer the global market.

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As the saying which goes “one man’s trash is another man’s treasure”, the 12-year-old boy who once vowed to prove his naysayers wrong is now literally turning tonnes of scrap plastics into gold, and is set to transform the recycling industry’s value chain into one which generates immense returns.

Started from having only four staff while based in its old factory in Masai, Johor, Heng Hiap Industries employs 121 staff today, having recently moved into its new factory in Pasir Gudang, Johor. The new factory is also strategically located near to the Port of Tanjung Pelepas and the Johor Port, from which its finished goods are exported around the world.

“After the subprime mortgage crisis, we got our sales back and regained our momentum, we also started venturing into other types of recycling and exporting to more countries with bigger customisation capabilities,” Seah Kian Hoe told KINIBIZ in an exclusive interview.

According to Seah, Heng Hiap Industries’ biggest export markets today are Japan, South Korea, Australia, New Zealand, the European Union, and Southeast Asia. The company has also recently begun its foray into the US, which is anticipated to be its next core market.

“What we are trying to do is that recycling should not stop as just being a campaign, it should be a business. For any initiative to become dynamic, you need to turn it into a business, and once it’s turned into one, you’ll start to see different possibilities and ecosystem built from there,” he said.

When asked what is his unique selling proposition (USP), Seah said: “Customisation is the very core of our business. Whatever our customers make, we will help them to strengthen their USP. By helping our customers strengthen their USP, that becomes our USP too.

“Take, for example, our fast-cycle plastics. Any product that takes 10 seconds to make, with our materials, it takes only five seconds. This is selling very well especially in countries with high production costs like Japan, Germany, Holland, the UK, and South Korea.

“They like all these materials because this can help them get what they want. Some of them want to be the first in the biodegradable space, the first one to give protein-induced product, so we cater to that. I think customisation becomes our core, where in the past we were talking about commodities.”

The customisation that the company offers also shields it from the headwinds that the plastics industry is facing due to lower crude oil prices, which incidentally also comes at a time when the new factory is adding to its capital expenditure.

“Because of our customisation, we can now start to sell our products at higher prices because the value we offer is so much more. Everything is customisable, it’s easier, it’s faster, so we can afford to sell at higher price.

“And that’s in fact what we are doing right now. That’s an edge and that made us realise that we have been underselling in the past, and that we are selling customised solutions, which differentiate us from being in the commodity business,” he said.

Coming full circle

Due to his efforts in integrating the fragmented plastics industry and for providing innovative, customised, and environmentally friendly solution to his clients, in 2013, Seah won the Junior Chamber International’s World Award for the 10 Most Outstanding Young Persons, the first of many recognitions to come. Seah chose to dedicate the honour to his parents.

“Up on the stage I said, ‘mum and dad, this is for you. I’m proud that I’m being raised by a family of recyclers, by both of you, and that you have taught us everything. But most importantly this is an award for you. Before this I do a lot of things to defend the family honour, so that we earn our respect and good reputation’.

“But from now on, I said, ‘I will not do anything for you guys anymore. Now whatever I do, I do it for myself and for my team’. It is at that point when I was relieved of the baggage to defend my parents and my family’s honour,” said Seah who is the second among four siblings.

The biggest satisfaction, he added, is when young people increasingly associate themselves with the recycling industry without feeling ashamed, and that he is now the one successful example in the industry, or the topmost genius in his profession, which any ridiculed 12-year-old can proudly cite as a successful example.

Not slowing down

For the financial year ended April 30, 2015, Heng Hiap Industries recorded a revenue of RM70 million, a 22% growth from RM64 million in the previous year, after maintaining double-digit growths for the past five years. With the new expansion in capacity, Seah is upbeat on the prospects of the company going forward.

Being a mentee of Endeavor Malaysia, a non-profit organisation which is part of a worldwide movement that mentors entrepreneurs with the potential to scale up, Seah realised that the potential of the business does not stop where it is.

“I have been growing organically from the beginning, and then registering a double-digit growth annually in the past five years. Like any other typical small and medium enterprises and we were quite happy about it. Every three or four years, I double in size so I thought it wasn’t too bad.” he said.

But Afzal Abdul Rahim, his mentor in Endeavor Malaysia, also chief executive officer of TIME dotCom got him to think differently. “Afzal got me to look at things differently that if I were to play it right, it could even be a global phenomenon, it could reach global impact. Even if it doesn’t reach that, I can try my best to make it regional, or even just a Malaysian champion which is not too bad.

“So we try to do things differently, we try to act differently, look at our sources, the lower-hanging fruit around us… and after that, the results have been amazing. Since I came back from Endeavor, we grew our business at the rate of double digits every month, from August till October.

“At the rate that we are going, we are going to hit our maximum capacity pretty fast. We try to think out of the box by doubling with the kind of resources we currently have,” he said.

Exploring new growth frontiers

Despite already exporting to 22 countries with 70% of its revenue derived from the overseas market, Seah has no plan of slowing down. In fact, like his younger self, he aspires for better things now that he has achieved his goals of bringing pride to the family.

At their new factory in Pasir Gudang, Seah is venturing into converting plastic scraps into reusable energy. While consumer electronics and home appliances will continue to drive the mechanical recycling business, the company is also innovating within thermal recycling and energy recovery with the development of plastic coal substitutes and biodiesels.

The new factory in Pasir Gudang incorporates similar environmentally friendly and energy efficient features into the building.

“Our core business is we will still be in the material recycling part. And thermal and chemical (recycling) are possibilities in the future. What makes us different is that by integrating all these, we could be a company whereby we generate our own electricity, we make our own diesel, and also recycling rainwater.

“The concept is what I’m going after, I want to showcase the possibility of a fully sustainable lifestyle, or a smart factory, if you would call it, is possible. The only fuel to get these running is recyclables. So that’s the whole concept that we are trying to showcase, that it is possible to integrate these processes into the production chain,” explained Seah.

In for the long run

When asked for how long does he expects to be in the business, he said: “I think it’s going to be for a very long time. Especially when we see the kind of possibilities right now, and when I have more crazy ideas than before.”

Currently assisted by his assistants who take care of production and supply chain, Seah who is managing director of Heng Hiap Industries also leads the four-person R&D team of his business. But Seah said he plans to delegate more of his responsibilities within the next one to two years.

With a global plastics industry which he estimates to worth US$300 billion (RM1.3 trillion) per annum, Seah said the business is only capturing a negligible portion of the global industry. He estimates the industry to worth RM5 billion in Malaysia.

“We throw away 1.2 million tonnes of plastics every year in the country, and with our capacity we only capture 5% of the local market. A double-digit growth is too slow and it will never become the phenomenon that will solve the problem if we go by this rate,” he said.

On scaling up

When asked if he is likely to bring the company public, Seah remained coy while did not deny the possibility.

“Yes, there is a possibility that we will consider. But as far as we are concerned, we have managed to move into a new factory, expand our sales, diversified into other areas, right now we are still able to do that with our own funding.

“We are trying to get the best of impacts, the best of returns from the set-up that we’ve had. Soon the business model is going to be very different within three years from now, in terms of the financial structure, we would consider but whether it will be a definite, we’ll see.

“It will be exciting, it’s a big possibility, but it takes more than just one person to achieve that,” he said.

When asked on his advice for aspiring entrepreneurs, Seah said: “You need to have that irritation. To be irritated by something. And what is that something?

“For me personally, the important thing is to spot the obvious. When I look at all the other successful, aggressive, creative business owners, they share one common thing: they spotted something obvious right before their eyes, and nobody seemed to notice it.

“Nobody seemed to care, or connecting spotting the obvious with something that is irritating them. If I connect that discovery with what I heard from my mentors, if you actually see it and it gets to the point where it really irritates you, that’s it. That’s your seed.

“Because if it doesn’t irritate you, it’s not going to push you to take actions. Spotting the obvious is not enough, what irritates you?” he asked.

Yesterday: Moulding his own plastics empire