When Singapore entered into the “circuit breaker” lockdown in early April to stop the community spread of Covid-19, businesses of all sorts ranging from restaurants to departmental stores suffered from a drop in sales. The construction industry was also badly hit as the infections were largely concentrated within the dormitories that housed foreign workers, many of whom worked in construction sites all across the island.
Although steel prefabrication specialist BRC Asia is not directly in the construction business, most of its clients are. That meant severe disruption to its business nonetheless. “Although the government had lifted the circuit breaker in early June, construction activities were still halted. And while we were all ready to work, our clients were not. It was only in mid-August that we started to take on more meaningful work,” recalls BRC Asia’s CEO Seah Kiin Peng in an interview with The Edge Singapore.
“The biggest challenge for BRC Asia therefore was: How do you manage a company when there is no revenue coming in? Everyone is looking at you to lead. But no revenue coming in does not necessarily mean less work,” says Seah, adding that the responsibility of leading the company throughout the circuit breaker period was a steep learning curve.
And it wasn’t merely about the disruption to its manufacturing operations. BRC Asia runs three worker dormitories that house the workers for its factories. Unfortunately, some of them had tested positive for Covid-19 as well.
Fortunately, the company was well prepared. Long before the circuit breaker in January, the company had started preparing for the pandemic. In fact, meetings bookending the start and end of the Lunar New Year break had Covid-19 on the agenda. When the circuit breaker started, each workers’ dormitory went into self-imposed isolation to minimise the risk of spreading the infection to the wider foreign worker population in Singapore. Even members of the management team were not allowed to enter the dormitories. The workers, Seah recalls, obeyed all the rules as they were also concerned about their own safety.
For Seah and the management team, it was a new challenge they did not expect and took up most of their time and attention during the circuit breaker period. “We do not have dorm operators as our dorms are quite small, each with only about 250 people. So, we have to do the safe management ourselves — everything from ensuring their day-to-day welfare are taken care of to taking care of their physical and mental health,” he says.
Even with a few infected workers in the dorms, the company managed to contain the spread while still managing their welfare
More importantly, BRC Asia also put the adage of never letting a good crisis go to waste into practice. With projects paused during the circuit breaker period, Seah led the team to focus more on internal improvement projects instead so that the company would emerge in a stronger position with better products and services to recapture existing business as well as grow new ones when the pandemic dies down.
“These are important aspects of running a business, but management tends to have less time for them as we travelled more during normal times. But with us grounded in Singapore and construction sites on hold, that was the best time to redouble our efforts on improving various aspects of the business,” says Seah.
In July 2018, BRC Asia acquired Lee Metal Group in a deal worth $199.3 million. Previously also listed on the Singapore Exchange, Lee Metal was also in the business of supplying reinforcement steel products and was deemed as a competitor of BRC Asia.
Since the two businesses were complementary, BRC Asia saw potential synergies in this M&A deal. However, as M&A veterans would note, the tough part of the process only begins upon completion of the transaction. Although both companies were somewhat equal in size, they had rather different corporate cultures.
“Lee Metal is a more localised company while BRC Asia has had relatively more international experiences. We had to properly communicate with each other, learn from each other, and merge our [working] cultures into one. Although we have completed the merger, the cultural integration will be a long ongoing process,” admits Seah, who believes there is value in merging both companies although communication is key to unlocking that value.
And the synergistic benefits of the M&A deal have been apparent in BRC Asia’s financial report card since the event. In FY2019 ended September, the combined entity reported revenues and earnings of $913.3 million and $31.6 million respectively, a 38.8% and 99.6% increase over the average combined revenues and earnings of BRC Asia and Lee Metal in FY2016 and FY2017. In FY2020, despite the severe disruptions from the circuit breaker and Covid-19, the group managed to achieve core earnings of $34.8 million, a 3.3% improvement over the preceding financial year.
“Our merger with Lee Metal brought about significant synergies in two key areas: One is in raw material purchasing and the other is in manufacturing operations. Simply put, competent management of the M&A process extracted synergistic economies of scale from the merger that improved both our competitiveness in the market as well as our returns,” explains Seah.
As at end September, BRC Asia’s sales order book stood at about $1 billion, which will be recognised in sales gradually over five years.
Plans put on hold
Before Covid-19 struck, the year 2020 was supposed to be the start of overseas expansion for BRC Asia as part of the second phase of the company’s post-merger restructuring. The company was planning to expand its footprint in the China market while looking to enter other Southeast Asian markets. However, with the pandemic, the BRC Asia team was unable to travel. But as Seah puts it, “These plans are just placed on hold. We still intend to go forward with them; it is just a matter of when. Once the uncertainties surrounding Covid-19 clear up, we will push forward.”
Meanwhile, BRC Asia is putting its focus on accelerating its digitalisation and automation initiatives in the near- to medium-term. As part of its plans, it intends to digitalise its payments systems and automate several work processes in its manufacturing operations.
“We had already begun digitalisation before Covid-19 came about, but the pandemic just accelerated the pace. And since we have our overseas expansion plans on hold, we can focus our attention on our digitalisation efforts. There is no point bemoaning what you cannot do. Rather, you should be thinking of what you can and should be doing,” says Seah.
Just like how reinforcing steel helps to keep buildings sturdy and strong, Seah sees the company’s staff and shareholders as his pillars of strength that keep BRC Asia standing tall and pushing skywards for growth.
“The glory of the company’s success does not belong to a single person. BRC Asia is not a one-man show. We pride ourselves on our strong teamwork. And with that strength, we can overcome any adversity,” says Seah on winning the Best Performing Stock in the Cyclical Consumer Products; Cyclical Consumer Services sector of the Centurion Club.
BRC Asia shares closed at $1.40 on Dec 7, 100% higher than it was five years ago.
“We are very thankful and honoured to be recognised for taking care of our shareholders,” he adds.