Winning Fabrics
    Category: Entrepreneurs By : Yessar Rosendar Read : 1458 Date : Thursday, January 04, 2018 - 15:12:26

    Ahmad Zamroni / Forbes Indonesia

    While many see textiles as a sunset industry, Alexander Foe, 35, is bucking the conventional wisdom. His company PT Nagasakti Kurnia Textile Mills, known as Nagatex, has found a profitable niche by focusing only on textiles for uniforms—from those for students to government staff. The Bandung-based company, founded by his father in 1982, had revenues of about Rp 400 billion last year.  Nagatex is in the top three in the segment, while many others in the textile industry have closed down.

    Alexander sees consolidation in the industry as an opportunity, and plans an IPO of Nagatex in the second half of 2018. Alexander still remembers the industry’s glory days in the 1980s, when the textile industry was protected by the government and banned imports. “Back when my father set up the company, whatever we produced could be sold—and one meter of fabric was equal to one gram of gold,” says Alexander who currently Nagatex’s president director.

    Alexander graduated with a bachelor for engineering and industrial management from Purdue University. He returned to manage the company in 2013, just as Chinese imports were flooding the market. To make things worse for the industry, many players, including Nagatex, weren’t professionally managed. “Those who couldn’t compete and were badly managed didn’t survive,” Alexander says.

    He was shocked, when he took over in 2013, that the company didn’t even keep a financial report. The company was plagued with inefficiencies and possible corruption, which were overlooked because profits were healthy. With the presence of stronger competition threatening Nagatex’s existence, Alexander had no choice but to do a radical restructuring and modernization, that included getting rid of some of the senior staff hired by his father.

    One crucial decision that saved the company was a shift to uniform fabrics in 2003, as other segments were more vulnerable to cheap Chinese imports. The only uniform fabric that Nagatex cannot make is military fabrics, as these require different machinery and have much higher technical requirements. Today, about 90% of Nagatex’s production is uniform fabrics with an annual production that can reach more than 20 million meters of fabrics. “We currently hold 30% market share in uniform fabrics segment,” Alexander says, and Nagatex is among the top five local producers in the uniform fabrics market.

    While producing fabrics that go into millions of uniforms in Indonesia, the segment is not without its challenges. The textile industry overall only grew 1.8% last year, much slower than the national GDP growth. Surprisingly, tax reform may have contributed to slower growth. The government is now trying to raise tax revenues by targeting smaller businesses (usaha dagang rather than a PT), which often pay little or no taxes. Many of these companies are Nagatex customers, and the tax squeeze means they are slowing down or even going out of business. “I support these changes are for a better future, but these drastic changes do hurt the industry players,” Alexander says. To offset the slower domestic demand, Nagatex is now increasing its exports. Currently about 10% of its production is exported—to Europe, the Middle East, and Asia, with Japan being the biggest international market for the company.

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