Saha-Union Plc (SUC), the country's leading textile-based conglomerate, has announced a major restructuring plan that will see all sales and marketing activities transferred to each of the group's manufacturing subsidiaries.

SUC reported to the Stock Exchange of Thailand yesterday that its first major restructuring in two decades will take effect on January 1.

It is designed to strengthen the competitiveness of its member companies in both domestic and overseas markets, as well as allowing SUC to focus more on investment.

Until now, SUC has handled sales and marketing for its more than 50 subsidiaries both locally and overseas.

The restructuring will deliver responsibility to about 30 local subsidiaries for marketing and selling their own products.

A senior management source at SUC said the parent company will retain some trading and investment responsibilities, but the final goal is to turn SUC into an investment operation in the near future.

The source declined to reveal details of the investment plans, other than saying: "We are interested in potential investments that will generate high dividends for us and our shareholders."

According to the restructuring plan, SUC's future income will come from its trading business, returns on investments and dividends from subsidiaries.

The company has faced intense competition from both a local situation of oversupply and from dumping of cheap foreign products, especially from China. It can make only marginal increases to its selling prices, and these fall short of reflecting recent increases in production costs.

As a result, SUC's subsidiaries have declining profit margins despite their attempts to minimise costs, and the slide is expected to continue.

"The group's management should be streamlined to meet forthcoming challenges," SUC told the SET.

Under the new structure, each company will formulate its own production, sales and marketing framework in accordance with its own specific conditions.

The resulting flexibility will enable each company to better compete and ensure its continued existence.

SUC's internal restructuring will not affect outsiders, since most customers are aware of the relationship between companies in the group.

The senior management source said those employees handling sales and marketing of each of the group's products will be transferred to each respective company to ensure a smooth hand-over of responsibility and continuity of business.

Consequently, the equity method of reporting operating results in the group's consolidated financial statements will not be significantly affected. The changes will be reflected mainly in the subsidiary companies' performance and market situation.

On a cost basis, income from the group's sales in the first year after the restructuring is expected to cut by about Bt 8.2 billion and net profit by Bt80 million, or a reduction of 50 per cent and 12 per cent to 15 per cent, respectively.

Nevertheless, returns by way of dividends from the group companies will increase as a result of higher sales and better efficiency. SUC will, therefore, be in a better position to pay proportionately higher dividends to its shareholders, the company said.

Achara Pongvutitham

 The Nation