Delta considers move into auto parts

Delta Electronics (Thailand) is considering taking over the operations of foreign auto-parts manufacturers under its business-expansion plan. 

Cash-strapped parts makers from the euro zone have approached Delta Electronics about selling their production plants. The company is negotiating details of the possible deals, which would be completed in the second half of this year.

Delta Electronics has to consider how it could smoothly take over the plants and extend its core business from electronic components, director Anusorn Mutaraid said yesterday. 

Its huge cash reserve of Bt10 billion has allowed the company to expand into related businesses. Last year it took over two firms, a Swiss solar-cell business and a telecommunications firm in India.

Longer-term, Anusorn said, the company wanted to move the focus of its acquisitions from manufacturing to research and development, particularly in the information-technology sector. 

“The acquisition of manufacturing plants needs huge capital, while buying research and development businesses incurs lower cost but creates more profit.” Anusorn said such a move would also diversify its business risk – a concern for the company after its plant was submerged last year, causing supply problems. 

Nonetheless, the company targets net profit margin of 10-11 per cent this year, up from 6-7 per cent last year.

Anusorn said the company would this year focus on profit growth rather than sales revenue. The growth would be generated in Asean markets such as Cambodia, Indonesia and Malaysia. The firm is currently negotiating export contracts in these countries. This strategy also involves a slowing of exports to European countries and the United States, which currently account for the lion’s share of the company’s exports.

In addition, investments made in India last year are expected to bear fruit this year, generating outstanding income thanks to rapid growth in the telecommunications industry there. Income from Asian markets is forecast to increase to 20-25 per cent of total sales, while the European market will account for 60 per cent and the US for 15-20 per cent. 

DBS Vickers reported that Delta Electronics announced net profit of Bt644 million in the fourth quarter last year, down 5 per cent year on year and 14 per cent quarter on quarter. However, it was a better performance than projected. In addition, the company realised a foreign-exchange profit of Bt63 million.