Hi-City Bioscience : personal care healthcare products manufacturer that listed on second board

Personal care manufacturer Hi-City Bioscience Group Bhd expects to spend more on research and development (R&D) this year after having allocated three per cent of its revenue on such activities.

Chairman and Managing Director Heah Chew Teng said that the company would emphasise more on its R&D division due to the changes of technology, consumer lifestyle and fashion sense.
He said that R&D activities were critical in helping operators to keep abreast of changing consumer preference either in the form of selecting key raw materials or utilising advanced technology when manufacturing personal care product.

“We expect to spend more this year on the R&D activities. This is one of our strategy to enhance our capability as the leader in personal care manufacturing,” he told reporters.

He said that operators who have in-house research and testing laboratories and undertaking R&D, would be able to translate latest consumer trends to finished products.

Heah said that there were opportunities to target specific market segments in personal care products including products that cater to the needs and requirements of specific age groups such as teenagers, male segment or older age groups.

The managing director said that each different market segment has very specific requirements including among others, anti-aging products, plant based products, products for sensitive skin or acne.

“We are confident that there is always a market for personal care product because these are the products that customers always use,” he said.

He said 49 per cent of the sales was contributed from the domestic market and the remaining 51 per cent from the export activities.

Hi-City Bioscience exports its products mostly to United States (US), Australia, Africa, China, New Zealand, Taiwan and Brunei.

Hi-City is the OEM for American personal care products under brands such as Refreshment, Dawn Mist and Medichoice.

Hi-City Bioscience Group Bhd has entered into an agreement to be an original equipment manufacturer (OEM) for New Zealand-based Aire Natural Science Labs Ltd in middle of 2004 before listing to the second board of Bursa Malaysia on July 14, 2004. Chairman and Managing Director Heah Chew Teng told reporters after the agreement signing with Aire Natural Science Labs Ltd that Hi-City would manufacture personal care products and supply them to Aire Natural customers in the airline and hospitality industries.

“The personal care products, to be labelled under Aire Natural brands Caire and Rejuvin, will be used in the first and business classes of international airlines. Aire Natural is the only company in the world that offers researched, purpose-designed and effective products for airlines. Their products are specifically designed to counter-balance the effects of prolonged confined air-conditioned environments such as dehydration and jet lag.

“Traditionally, Hong Kong has been the hub of travel and hospitality supplies to the world market. By teaming up with Aire Natural, we are confident that Malaysia, more specifically Penang, will emerge as a strong contender to wrest this position from Hong Kong,” Heah said.

He expects the new business deal to initially contribute between 5% and 7% of the group’s 2005 revenue. “The contribution would gradually grow. Currently, the group's original equipment manufacturing activities generate about 51% of group revenue.

Heah and Aire Natural Director Grant Bittle signed the agreement in the presence of Penang State Executive Councillor Teng Chang Yeow.

Bittle said Aire Natural and Hi-City would collaborate to produce the formulation for the personal care items. “We are in talks with six international airlines to supply our personal care products to them. Currently, we are producing for about 10 airlines,” he added.

In 2003, the market size for the personal care products industry in Malaysia was estimated at RM1.6 billion and the market share of the Hi-City Group was approximately two per cent of the total industry based on local expenditure.

For the financial year 2003, the company posted a net profit of RM5.60 million on the back of turnover totalling RM31.60 million.For the group's first nine months ended Sept 30, Hi-City reported an unaudited after-tax profit of RM4.3 million on the back of RM26 million revenue.

Hi-City Bioscience Group Bhd strategises to be a total supplier of medical products in the region. As part of its plans to produce medical devices and pharmaceutical products, it will launch a new range of drainage bags for collecting body fluids, catheters and tubes under its own brand name, Clinicgoods, next year.

Group Managing Director Heah Chew Teng told StarBiz that production was likely to start in the fourth quarter of 2005. He said the medical devices would be exported to the United States, where the group had already secured customers.

Heah said the group was also eyeing the African market, where the group was currently establishing its networking, adding that the other two important markets are located in South-East Asia and Europe.

Heah said the group had recently introduced new products such as medicated and body wipes for the markets in the US and Malaysia, and nutritional supplements.

"The medicated and body wipes are sold under the group's in-house brand Hanitizer," he said, adding that orders for the bulk of the group's medicated and body wipes would come from the US. Meanwhile, the nutritional supplement, sold under the brand name Clinicfoods, is targeted at the local market.

Heah said the group had invested RM3 million in machinery and equipment from Italy and South Korea for the production of these two new products.

About 70% of the group's raw materials such as chemical ingredients are sourced directly from suppliers in Europe, China and the US.

"We expect the recently launched products to contribute about 20% to revenue next year," Heah said.

A new research and development (R&D) laboratory is among Hi-City Bioscience Group Bhd's strategies to upgrade its product development activities.

The Penang-based company, which aims to incorporate more research-based work in developing its healthcare and personal care range of products, is also looking at tapping the medicinal value of local plants, Chairman and Managing Director Heah Chew Teng said.

Its investments exceeding RM5 million are being earmarked for a new leased facility which will house not only the R&D lab, but also its headquarters and manufacturing site for healthcare products. The proposed plant will be sited on a 4.8ha on the fringes of the Waldor Industrial Park at Sungai Bakap in Seberang Prai. Group executive chairman and managing director Heah Chew Teng told reporters after the company's AGM that the group would move to the new facility, which is under construction, at the end of the year.

He added that the plant would start operations early next year.“This three-storey facility, which we will lease from the developer, will also serve as the group’s corporate headquarters,” he said. “On top of that, it will also house our research and development (R&D) unit to develop healthcare products such as nutritional supplements and vitamins.

“The R&D unit will also work together with public tertiary educational institutions to develop pharmaceutical products using extracts from plants with herbal and medicinal qualities,” Heah said. Hi-City Bioscience also planned to R&D initiatives with overseas pharmaceutical and biotechnological companies, he added.

Production of the company's healthcare products - which include dietary supplements and generic pharmaceutical products under the "Clinifoods" brand - is expected to commence by early 2006.

"We will continue manufacturing our personal care products - now totalling 650 items - from our existing plant in the Prai Industrial Estate," Heah said, adding that the company hopes to expand its existing range of less than 100 healthcare items this year.

Hi-City's products are sold locally, and to customers in countries that include the US, Canada, Australia, the UK, New Zealand, Africa, China, Taiwan, Singapore and Brunei.

The group's own brand of products include "Hyginix", "Hanitizer", "FSMP", "Dermaplex" and "Home Spa".

Tag: Cosmetic : Beauty :Malaysia: Health & wellness Biotechnology