International conglomerate UMW Holdings has braced the recent financial adversities with a strong rebranding strategy. Not only are they looking positively towards developments in 2009, but last year's performance was also unaffected by the economic turmoil that plagued the general corporate sector elsewhere in the last quarter of the year.
UMW Holding's rebranding strategy comes as a breath of fresh air for the diversified group who operate businesses in the automotive, equipment, manufacturing and engineering and oil and gas sectors.
Despite their nine-month financial statement as of September 2008 recording a newly breached MYR 1 billion, the conglomerate has considered focusing on another business area other than their automotive sales (the sector that led to the new profitability record). The oil and gas sector has posed a new opportunity for UMW Holdings with the company's recent contract with PCPP Operating Company Sdn Bhd for major projects within Malaysia. PCPP Operating Company Sdn Bhd is a joint venture between the leading oil and gas corporations of Petronas Carigali (Malaysia), PetroVietnam (Vietnam) and Pertamina (Indonesia). Other amiable business relationships have also formed, ready to strenghten UMW Holdings' presence into the international arena for oil and gas.
Looking beyond profits and market dominance, the corporation also renewed its Corporate Social Responsibility (CSR) commitment to the marketplace in August of last year. Independently audited by Bureau Veritas, their CSR programme was awared a Global Reporting Initiative (GRI) Application Level A (+) Certification, the highest on the Bureau's rating scale. Though CSR has always been part of the company's commitment, its renewal amidst recent trends of CSR surfaces with perfect timing to reestablish that UMW Holdings takes pride in maintaining their reputation as a strong corporate citizen.
Company Background
In September 2008, the UMW Group achieved an 85.3% increase in profits from 12 months prior, marking over MYR 1 billion pre-tax profit; much of which was attributed to their automotive and equipment segments. The company continued to declare a high payout ratio for interim dividends.
However, unbeknownst to many, nearly a century prior to such profitability, United Motor Works - as it was originally called - began as a small automotive repair shop. That establishment took place in 1917. Through years of commitment and reliable services, the repair shop transformed into a thriving conglomerate that has established a presence in different sectors of the economy.
Through smart partnerships with Toyota and Perodua (Malaysia's economical automotive alternative), UMW is privy to a high level of sales by assembling and selling a wide range of cars, both luxury and economical purchases by all.
Their marketing and sales expertise also extends into the equipment sector where there is a familiarity with heavy equipment, industrial equipment and marine and power generation equipment.
Under their manufacturing and engineering segment, UMW Holdings concentrates on innovative engineering solutions to the auto components, transportation, petrochemicals and oleochemicals sectors.
UMW's oil and gas division was established in 2002 with the focus of becoming a dominant player in the domestic (Malaysian) and international market. With the oil and gas industry becoming such an important market internationally, UMW perceives this sector as being their cashcow for the future.
Rebranding
UMW Holdings had officially rebranded itself in February 2008, but as any other marketing strategy, the presence of its new form continues to develop in the minds of the consumer. The rebranding exercise had reportedly cost MYR 20 million, inclusive of a newly unveiled logo and a new corporate slogan entitled "Beyond Boundaries."
Managing Director and Chief Executive Officer Dr Abdul Halim Harun explained that going beyond boundaries surpassed geographical or physical boundaries but involved creating a whole new mindset for the corporation as a whole. The elimination of barriers (of any kind) is nothing new from any management's perspective, and its importance is definitely no less faltering for such a diversified group. The new logo displays a new colour range to emphasise the importance of diversity.
Oil & Gas Projects
UMW Group's foray into the oil and gas industry in 2002 was not a decision that was made lightly. However, it paid off with the sector contributing approximately 35% of the group's revenue (despite the segment's infancy). Opportunities in the sector range from: the company being a strong market player in the Malaysian market and aggressive expansion to overseas' markets including China and India. Though the prices of oil have fallen, creating a negative picture from the sector's perspective, the company is determined to seek out further projects relating to the segment in order to diversify their reliance of profits for 2009. The company is actively looking into servicing the oil and gas demands in East Malaysia. As of August, their first major rig in East Malaysia has been completed and is to be kept fully utilised until 2010.
Going 'Beyond Boundaries' has also been a major theme; leading to the optimistic outlook for UMW's oil and gas segment. Dr Abdul Halim Harun has relayed his confidence on several occasions upon the future returns the company can expect from their international projects. The Group now has operations in China, India, Vietnam, Singapore, Thailand, Indonesia, the Middle East, Taiwan and Australia. The international oil and gas projects have so far contributed to nearly 80% of the segment's income. Though this is significant, the maturity of these projects have yet to be assessed but the corporation is still optimistic that they will flourish and continue to progressively contribute to UMW's profitability.
CSR Commitment
UMW's CSR strategy is one that is as comprehensive as their business models. Overall, they look forward to servicing all parties privy to their services, including those that are non-human, i.e., relating to the environment. Their policies cover taking care of their shareholders, clientele, and employees through different sub-set policies of their CSR commitment.
With the Beyond Boudaries theme in mind, the Group has maintained its integrity in upholding a world-class status company. The Company's awards relating to their CSR also marked themselves as the pioneer Malaysian company to fully comply with the stringent requirements of such assessments. In 2007, the company had spent MYR 20 million on CSR policies that were formulated to focus on the workplace, environment and the community alone.
The general ingredients of any CSR strategy lie in best practices in dealing and promoting human rights. However, with the rebranding theme in mind, UMW Holdings has also geared itself to find common values shared by the entire UMW family; to refine and amplify these values to revitalise parties privy to UMW's operation; to continue to seek differentiation in the market place; and to push for global expansion. CSR always has to be a long-term investment for any corporation, especially one with high-class recognition such as UMW Holdings.
Conclusion
UMW Holdings has been a key market player in various sectors of the Malaysian economy. As a multinational however, a fair portion of its revenue is also sourced from international projects, keeping the corporation abreast of global trends and adversities. Such diversification has actually shouldered the burden of financial difficulties faced by the corporate sector in recent months. And as a conglomerate, diversification is nothing new, and the corporation looks forward to new projects in 2009, especially in a sector as precarious as the oil and gas industry. International projects through their oil and gas segments have already marked their presence overseas and are poised for long-term profitability. The group has heavily relied on the automotive sector in the past to maintain high dividend pay-out ratios in favour of their shareholders - next year, they are looking forward to a change.
Their rebranding strategy that is focused on changing mindsets within and outside the company has also come with their new and improved CSR commitment to society. Being the first Malaysian company to fully comply with international criteria and ratings, UMW Holdings is positive that this commitment will further strengthen their presence as an international player with world-class status.
Key Learnings:Even major conglomerates are susceptible to rebranding strategies as a positive step forward to a new image and mindset. Despite being established for nearly a century, UMW Group moves forward during the economic turmoil with strong industry manouvres to maintain their presence and dominance in the market. Though rebranding strategies can come with a hefty cost, the long term benefits if properly executed are immense.
Diversification is generally the key to a successful rebranding strategy as such a strategy carries high risks of setback. A diversified company has less reliance on a single sector for profitability and therefore is able to focus on different cashcows at different times. Considering the amount of money that is spent on marketing strategies, strong market focus is also an intergral criterion for rebranding success.
Corporate Social Responsibility (CSR) commitments are becoming the trend for many large corporations. As this may create a positive corporate community, many corporations are still learning about the criteria and the meeting of the criteria to as an important factor to its success. Like any other strategy, CSR is a long-term initiative with multiple benefits to its name and has to be taken seriously in order to establish best market practices.
By Maria Zain
© Dinar Standard 2009
