Horst Pudwill Emerges as U.S. Housing Recovery Boosts Techtronic Industries Exports

May 22 -- Horst Julius Pudwill, chairman of Hong Kong-based Techtronic Industries, has emerged as a new billionaire as shares of the power equipment supplier surged by more than 100% in the past year. With the bulk of its manufacturing facilities in southern China, the company delivered record revenues and profit in 2012, boosted by strong sales of power tools and floor care products in the U.S. and European markets.

Benefiting from a nascent recovery in the U.S. housing market and strong cost controls, Techtronic’s group sales increased 8.4% to $3.67 billion in 2012. Profit grew 32% to $201 million.  The share price has climbed 111% in the past twelve months. Pudwill, 69, who owns a bit more than 20% of the company, has seen his net worth jump to over $1 billion, Forbes calculates.

Pudwill first visited Hong Kong from Germany in the mid-1970s as a sales and marketing representative promoting Volkswagen vehicles. In 1985, along with business partner Roy Chung Chi-ping, he founded Techtronic Industries in Hong Kong, which had six employees and focused on producing rechargeable battery packs in hand tools. It later assembled tools for overseas brands. In the 1990s, it began buying up consumer brands. Today, the company has grown to be one of the world’s largest suppliers of cordless power tools and floor care appliances. It employs over 20,000 people worldwide.

In 2000, Techtronic purchased North American power tool operations previously owned by Japan-based Ryobi Limited. It acquired Milwaukee power tools along with AEG, from a Swedish group in 2005 for $626 million. In 2007, Techtronic bought the ailing Hoover brand from Whirlpool WHR -0.34% for $107 million, and turned around the money-losing business.

Pudwill retired as CEO in 2008 but remains chairman of the company.

Techtronic is best known for brands like Milwaukee Electric Tools, Homelite outdoor products, and Dirt Devil and Hoover vacuum cleaners. Consumers in Europe and Australia might be more familiar with its Ryobi and Vax brands. Some 74% of revenues come from the U.S. market and 20% from Europe.

Product demand in the US is benefiting from a recovery in housing and from the reconstruction efforts following Hurricane Sandy., J.P. Morgan Hong Kong analysts Leo Chik and Andrew Hsu said in a recently-released report.

Fueled by the housing market growth, Techtronic’s largest customer, Home Depot HD -1.44%, just reported higher-than-expected results for the first quarter of 2013, and raised its sales and profit outlook for the year. Similar to Home Depot, Techtronic has seen increased demand for tools and power generators after Hurricane Sandy.  Power tool sales in the U.S. grew 10% in the first half of 2012, the analysts said. Milwaukee, the primary professional brand for Techtronic, grew by 23.7% driven by strong demand from U.S. contractors for its new “Fuel” line of brushless motor products launched recently. In Europe, professional tool sales also grew double digits.

The analysts expect lower material costs and an appreciating Euro could help raise 2012 and 2013 EBIT (earnings before interest and tax) margins to a five-year high of 6.7%, rising to 9.7% by 2015 with increased sales growth. However, the key risks to its businesses are rising cost of production in China and a slower-than-expected recovery in US demand.

Headquartered in Hong Kong, Techtronic maintains manufacturing and research facilities in Asia and North America, as well as a customer servicing network in North America, Europe and Australasia.  But the bulk of its manufacturing is in southern Chinese city of Dongguan.

Pudwill holds a master’s degree in engineering and a general commercial degree. He is married to Barbara Pudwill. Their son Stephan Horst Pudwill, 37, joined Techtronics in 2004 and now serves as president of strategic planning.  Pudwill lives in Hong Kong and enjoys golf and tennis.

www.forbes.com     

Powering Up - the Story of Roy Chung Chi-ping, Co-Founder of Tectronics

A drive for innovation and adventure are what helped make Techtronic Industries Company (0669) co-founder Roy Chung Chi-ping the successful industrialist he is today.

HONG KONG -- September 12 -- A drive for innovation and adventure are what helped make Techtronic Industries Company (0669) co-founder Roy Chung Chi-ping the successful industrialist he is today.

The accomplished and articulate non- executive director is also chairman of the Federation of Hong Kong Industries, representing the interests of 3,000 companies operating 60,000 factories in the mainland.

All the business training Chung, 59, received was hands-on, which is typical of his generation.

Coming to Hong Kong in 1967 after finishing secondary school in Macau, he started as a warehouse assistant at ITT Corporation. But his ambition drove him to take evening classes and he found himself promoted to manager of the US- based telecom.

That is where he met his future German business partner Horst Pudwill. After working at ITT for 10 years, Chung and Pudwill left to set up their own company.

And in 1985 was born Techtronic Industries, which now makes an array of power tools, outdoor power equipment, floor-care appliances, solar- powered lighting and electronic measuring tools.

"Neither of us was very knowledgable but Pudwill [now TTI group chairman] had traveled extensively, which is why he knows a bit of everything.

"Both of us knew, the only way we could be rich was by having our own business."

Despite the keen competition, Chung does not feel it is more difficult for youngsters these days to run a successful business.

"There are different kinds of success stories," he says.

"The new generation is smarter, they are better educated and have more opportunities. The post-80s and 90s generation should turn their sense of anxiety into a force of creativity."

To explain, Chung adds: "I was almost penniless after setting up the business. It was difficult to seek financing at our time, whereas young people now have incubator funds and venture capital.

"I always worried whether I would have enough money to pay my staff and buy raw material."

After 26 years of hard work, the company saw a record net profit of US$80 million (HK$624 million) and historic sales of US$1.8 billion in the first half of this year.

In addition to hard work, Chung attributes his success to right product selection. Techtronic, for instance, started out making rechargeable batteries and chargers.

"Although we saw the demand for personal computers at the time, we did not make them as we weren't familiar with them.

"With determination and guts, we expanded the business through acquisitions. We acquired a floor-care business in North America since we noticed there was only detergent for carpets at that time but nothing really to care for floorboards."

TTI acquired floor-care products manufacturer Hoover in 2006 from Whirlpool for US$235 million, and is now planning to sell the unit for US$900 million.

Leveraging existing advantages is also key to Chung's success.

"We have no competitive edge when it comes to branding, technology, and distribution. But we've been making good use of the potential in Hong Kong and the mainland to expand our business," he says.

"The mainland provides us the low- cost advantage. After acquiring Hoover, we shut its factory in Mexico and moved the production plant to Dongguan.

"Having our headquarters in Hong Kong, which has a sound legal system, allowed us to tap into the international market. And the acquisition provided us with an international sales network that we lacked before."

However, the mainland cost advantage is shrinking for manufacturers amid soaring inflation and yuan appreciation, with even reports of Hong Kong-invested Guangdong factories closing down. But an unfazed Chung says: "One should turn risk into opportunities, and turn challenge into motivation. One has to be optimistic!"

"Hong Kong manufacturers have been in the processing and assembly business for more than 30 years in Guangdong," he noted.

Such factory businesses were introduced in the early 80s when Beijing launched its Open Door Policy, hoping to attract foreign direct investment.

"Labor-intensive industry is unsustainable. Inflation is nationwide, you can't avoid it even if you move your factory out of Guangdong. One has to always be ready for changes and challenges.

"No one has ever had a completely smooth life. Even [Hutchison Whampoa chairman] Li Ka-shing faced challenges when he launched 3G telecom services."

Instead of fearing failure, Chung believes an entrepreneur should be adventurous.

"You can apply defensive strategy when playing football because the match will come to an end anyway. But you can't do that when you run a business since it never ends. If you remain conservative, you will be knocked out." But this is the attitude of some young people nowadays, says Chung.

"We're the first generation and we have no burden. Unlike us, the second generation is afraid of losses. They'd rather maintain status quo, that's why they're conservative."

Nevertheless, there are still exceptions.

And Chung cites sauce giant Lee Kum Kee as an example.

Founded in Zhuhai in 1888, the company has expanded its product range and business relentlessly and now sells Chinese and Asian-style sauces around the world.

Chung refers in particular to Lee Kum Kee's motto of "constant entrepreneurship."

"It's important to have an entrepreneurial spirit," he says.

But a leader must develop a good system that allows people to work efficiently and effortlessly.

"Some executives are busy answering phone calls during overseas trips. These people had better return and work in the office," he says.

As such, Chung, who stepped down as TTI vice-chairman to be a non- executive director in July, made his succession plans years ago.

"This was my plan so that I could concentrate on my role for the federation. If you can't really engage yourself in a role, you'd better not take it."

In addition to public duties, he has numerous hobbies. "I am an explorer," says Chung, who is also chairman of the executive committee of the charity and non-profit organization Outward Bound Trust of Hong Kong.

"I like traveling and hiking. I recently went to Africa to see the great migration of wildebeest. The animals can easily be trampled to death if they don't run fast enough."

Perhaps this bears an analogy to the business world in Chung's eyes.

The adventurer also likes joining the Oxfam Trailwalker run.

Says Chung: "I gain more confidence once I overcome a challenge."

www.thestandard.com.hk