Starting with a very simple operation 20 years ago, ABC Tissue has grown to become Australia’s third largest tissue supplier, not far behind the multinational giants K-C and SCA. Company owner and CEO Henry Ngai spoke with Perini Journal about where the company came from and where it is going.
Hugh O’Brian
Henry Ngai, the affable and friendly managing director at ABC Tissue Products, sees the company as his life’s work. And the crowning moment of his career may possibly be the construction of a new 45,000 ton per year tissue machine that is expected to start up in the second half of 2006.
Ngai got his start in the paper business in Hong Kong in 1974 when he began selling converted tissue products based on paper coming from his uncle’s tissue mill in Thailand. As the Hong Kong business grew, Ngai began to look for new frontiers and other growth opportunities. This led him to set up a small tissue distribution business in Australia in 1985. The operation developed so rapidly that he and his family decided to move to Sydney to grow with the company.
“We had a developing business in Australia and we thought that it would be an excellent place to expand our operations,” says Ngai. “We also believed that it would be the right place for our children to get a good education. The Australians are so friendly and open that it was an easy move for us to make.”
RAPID GROWTH OVER 20 YEARS. The decision has clearly paid off well for Ngai. ABC Tissue Products Pty. Ltd., formed in Sydney in 1985, has subsequently developed at an explosive pace. The name ABC was chosen to signify ‘A Better Choice’. “We are truly offering the consumers a better choice in quality and value,” Ngai says.
The strategy seems to have worked well. Turnover has grown from A$200,000 in 1985 to about A$200 million for the ABC Group in 2004, a multiple of more than 1,000 times in the 20 years. During this period, ABC Tissue has also received numerous business awards for its outstanding achievements. The most notable one is the 2004 Ethnic Business Awards of Australia.
Ngai has in the meantime become an Australian citizen and is proud to say that ABC is Australia’s biggest Australian-owned tissue producer. Kimberly-Clark, with a majority ownership in the USA, and SCA of Sweden (which recently bought Carter Holt Harvey’s tissue operations) each have more than 30% of the Australian market, with ABC standing at about 25-26%. Smaller Australian companies and imports share the remaining 10-15%.
NOW BUYING 40,000 TONS PER YEAR. The decision to build the new paper machine is based on the need to get better control over ABC’s supply of tissue jumbo rolls, the raw material for the converting operations. “We are buying over 40,000 tons per year of jumbo rolls from all over the world,” explains Ngai. “Therefore it makes a lot of sense for us to install a large, modern PM now to help us get control of both quality and price.”
The new paper machine is being built in Wetherill Park, which is located in Fairfield, just west of Sydney. The Italian supplier A.Celli won the contract to deliver the machine on a turnkey basis. The tissue machine project is budgeted at around A$60 million, including the machinery and buildings. The 3.4-m wide machine will make about 45,000 tons per year, which means that ABC will go from being a net buyer to a net seller of jumbo rolls, as the machine will make about 5,000 tons per year more than ABC presently needs for its converting lines.
Henry Ngai says that while the machine is crucial to giving him independence as far as jumbo rolls, it is also part of his plan to enhance product competitiveness, and to take further market share at the expense of imported product. He believes that the new machine will give him the ability to take business away from some importers.
“Our growth in Australia will come from getting higher market share by replacing imports. With our market share at about 25-26% now it will of course be much more challenging than it was when we were smaller. We are very concerned about quality and are seen as a high quality tissue supplier, so the new machine will be an important part of the plan to keep very high quality and increase market share.”
ABC makes a full product program including toilet tissue, kitchen towels, facial tissue, napkins, etc. Among the brand names are Quilton, Symphony and Softly. Branded products make up about 80% of sales and retailer labels about 20%. As raw material, the company uses both virgin fiber based tissue as well as recycled fiber.
The company’s present papermaking capacity is located at the Brisbane plant in Queensland. This operation was the former Softex tissue company that ABC bought in 2002 and marked Ngai’s first move into tissue making. The raw material used by this Queensland mill is recycled paper made up of high end wastepaper collected from offices. Annual production capacity of this Queensland mill is about 20,000 tons.
NEW PM WILL HELP EXPORTS AS WELL. In addition to taking market share away from the imports, ABC is also planning to export more tissue once the new paper machine is operating. Its present main export markets are New Zealand, Hong Kong and Singapore.
“The new machine is an important step in the vertical integration of the company,” declares Ngai. “We are confident that we can build a strong export market for our Quilton brand bathroom tissue, but we do not presently have enough capacity to support it. When the new PM is up and running, we will move strongly to develop exports further.”
In addition to the converting line modernization at Wetherill Park, ABC is also considering investing in a 3.4-m wide TAD paper machine in 2007. Further down the line, ABC plans to build a paper machine in New Zealand to support the converting plant already in operation there. A possible date for such a project could be around 2010, says Ngai.
ACTIVE IN THE COMMUNITY. Many successful entrepreneurs spend a lifetime in their business, yet they manage to spare time to support philanthropic works. Henry Ngai is no exception. In addition to building ABC Tissue, Ngai has also been very active in the Australian philanthropic projects. Every year he donates several hundred thousand Australian Dollars to help the needy, build elderly homes and establish scholarship funds. Ngai is a firm believer in giving something back to the community.
Henry Ngai is recognized in the Australian political and business arena both for his generosity in philanthropic works as well as outstanding business achievements. He is one of the Australian-Chinese entrepreneurs that have played an important role in the economic development of this country. As an example, he was part of a Chinese business delegation which brought Australia’s Prime Minister, John Howard, to Sydney’s bustling Chinatown for his first official visit there in 2004.
Ngai is also keen to acknowledge the support he and ABC have got from the local politicians in Fairfield where the Wetherill Park plant is located. “I am very happy with the local government and their receptivity to business. The Fairfield Council has shown an extremely positive and proactive attitude to ABC since we opened our first factory in 1987. This has made an enormous difference for us when it comes to our expansion plans. They have been very efficient and see the value we give to the local community.” Mr. Ngai said. Also like numerous other entrepreneurs, Henry Ngai has a hard time letting go of a little bit of the business and slowing down. He is trying to spread the daily workload a bit more in order for him to further identify business opportunities and raise capital for the company. “ABC is a family business for the moment,” Ngai says, “but we are planning to go public in the coming years. I want to retain a majority share in the company but would like to find strategic investors who will compliment ABC by bringing new technology, innovative products, and new market to the party. I also want to continue to build a strong management team to take the company into the future.”
STRONG FINANCIAL FOUNDATION FOR FUTURE GROWTH. Ngai considers ABC’s greatest strengths to be its good financial shape and the management team that is highly experienced in the tissue business. However, to build an even stronger foundation for the company he is looking to expand into other hygiene products such as baby diapers and feminine hygiene products.
Apart from promoting productivity and turnover, the management team is keen to put product quality in the first place and prioritized it as one of the key business objectives. With such an impressive record over the past 20 years, and well planned expansion projects being carried out, ABC looks set to develop very well in the future. •
A.Celli Paper supplying machine on turnkey basis
The new paper machine being built at Wetherill Park will be ABC’s first new PM. The machine is being supplied on a turnkey basis by A.Celli Paper of Italy. The 3.4-m wide machine will be capable of running at 2,000 mpm and output will be on the order of 45,000 tons per year depending, of course, on the product. The machine will be able to make a grammage range from 13-42 grams per square meter.
Celli will be responsible for essentially all aspects of the project except for the physical building in which the paper machine will be located. “The scope of the project is extremely wide, one of the biggest we have had,” says Ivo Olibano who is leading the project for Celli. “Included are all the papermaking equipment, electrical work, engineering and construction, erection and effluent treatment.
It is essentially a greenfield project as it is being built on a new site across the road from ABC’s converting but there is no papermaking on the site at present.” Celli’s plan calls for the paper machine to be shipped starting in December 2005 and all equipment to arrive in Sydney by end February 2006. Startup is presently planned for the second half of 2006, probably in August.