"Good timber does not grow with ease. The stronger the wind, the stronger the tree." Sudima International, a diversified company with interests in timber and agricultural, pharmaceutical, textile and yarn products, embodies this adage.
A 2011 winner of the Singapore 1000 (Emerging) award and the 2012 Enterprise 50 award, it is now a regional leader in the trading of timber, its core product, though it also has other business interests. The company's ability to adapt and grow despite increasingly challenging global economic conditions has made it resilient.
That timber prices are largely stable has helped, as have the company's policies in dealing with currency and market risk; Sudima International minimises its currency-risk exposure by using the US dollar in its transactions. Its diversified interests are also a hedge against market uncertainties, as is its practice of taking the role of the intermediary for its transactions - in yarns and textiles, for example.
Sudima, a family-owned business that is part of LNJ Group, was started by Anil Jhunjhunwala, now its managing director. The company started out as an entity heading the trading operations of its parent company. The family business was operating primarily out of Hong Kong, so Mr Jhunjhunwala's setting up shop in Singapore brought him the challenges of starting a business in a fresh territory.
He has had no regrets, he says. "It has been a great journey since 1994, and being focused has worked wonders for us."
Sudima's operations now span more than 17 countries. It has over 250 employees; the 35 who are in Singapore oversee the company's global network. Compare this to 1994, when the company began with just five employees.
In 2008, Sudima was granted the Global Trader Programme (GTP) status for three years. This meant that it needed to pay only 10 per cent in corporate income tax instead of the usual 17 per cent. Sudima's GTP status was extended for another five years in 2011.
In agriculture, Sudima trades in pulses, beans, maize, soya-bean meals, yellow peas and lentils; these are the company's second-largest source of revenue. In yarn and textiles, it trades in cotton yarn, polyester yarn, viscose spun yarn, jute and fibre; its pharmaceutical division is a joint venture with an Australian company.
In timber, Sudima is said to have a notable presence in the India and Vietnam markets. In certain regions in India, it claims to account for more than 10 per cent of the total import value of the cargo. The company's total supply of timber to India was worth more than US$107 million last year. Its manufacturing plant in Ho Chi Minh City produces rubberwood boards and kitchen-cabinet components for regional buyers.
The company has been awarded the Forest Stewardship Council (FSC) certification, which has cemented its reputation as a green company. This certification is granted only to companies that handle FSC-certified timber or timber products; these firms, along with their entire supply chains, have been audited for their harvesting techniques and operations, replantation and social-service programmes.
Mr Jhunjhunwala said the timber business has been a relatively stable one. During the 2008 global downturn, prices of most commodities fell by between 30 and 80 per cent; that for timber, in contrast, dipped by between 10 and 25 per cent, depending on the species of tree. Prices fluctuate more now, but regain equilibrium quickly because of the non-perishability and finite nature of timber. Prices are also kept stable by plantation owners who regulate the supply, and by the fact that timber has not traditionally been a traded commodity on stock exchanges.
Furthermore, the substantial capital requirement and specialist knowledge make for high barriers to entry to the industry, and limit the number of his competitors.
The business of trading is highly dependent on the quality of relationships between buyers and suppliers. And this is especially important when operating in environments such as developing countries, where institutions are weak. Strong ties between trading partners also lower the risk of defaults, given that each shipment can cost millions of dollars.
Sudima thus builds ties through continuous contact; it also susses out its potential business partners, such as by placing small orders first to test their reliability, without risking too much financially. With timber becoming an increasingly scarce resource and stricter logging regulations, its price is set to rise and margins from trading timber will eventually decline.
Markets in India and China have yet to consider sustainable options, but the gradual shift towards more environmentally friendly practices will eventually occur. On its part, Sudima sells off the saw dust and unused wood chips from its factory in Vietnam. The company is also looking into boutique hotel management in Myanmar and Vietnam, with the rise in tourism there. In Sri Lanka and Myanmar, it is looking into building a plywood manufacturing plant.