Advanced Group Continues Robust Growth

Although the manufacture of golf clubs, golf-club shafts, golf-club heads, bicycle frames, and bicycle forks is regarded as a traditional industry in Taiwan, Advanced Group has continued to post operating results that are no less impressive than those of the island's high-tech industries.

The company, the world's second-largest manufacturer of heads for woods, irons, and putters, shafts, and finished clubs, achieved an after-tax profit of NT$442 million (US$12.6 million at US$1:NT$35) last year with an earnings per share (EPS) of NT$6.62 (US$0.189). That EPS ranked the company among the top performers among firms whose stocks are traded on the nation's over-the-counter market.

Thanks to its strong performance and bright prospects, Advanced saw its share price skyrocket to NT$85 (US$2.43) late last year when the company went public. By March, the share price had slipped slightly to NT$70 (US$2), still sevenfold its face value. Sales in the first two months of this year totaled NT$797 million (US$22.8 million), up 55% over the same period of last year.


Supplier to the Top Brands


The confidence of investors in Advanced is understandable in view of the company's lineup of customers, which constitute a veritable who's who list of the industry's top brands--including Taylor Made, Maruman, Mizuno, and Dunlop. Recently the company has also won orders from other major players such as Nike and Callaway.

To qualify as a supplier to Nike, the company, whose full legal name is Advanced International Multitech Co., Ltd., successfully underwent a strict product-certification process conducted by Nike last year. Advanced Group shipped 200,000 golf clubs last year to the U.S. sports-equipment giant. The company has also been certified as a qualified supplier for Callaway.

According to the company chairman, Bernard Cheng, Advanced Group is projected to manufacture six million golf-club heads this year, a 20% increase over last year's level. The company also aims to ship three million club shafts, a 50% increase over last year's two million, Cheng says.

These are challenging goals given the wide variety of products sold by Advanced. For example, the firm makes heads for woods in the following specifications: stainless steel, titanium casting, titanium forged, bi-metal wood, and tri-metal wood. Its iron heads are available in stainless steel, forged iron, bi-metal iron, and tri-metal iron. The company's shafts are rolled carbon, filament wound, and molded. Currently, revenues from golf-club heads and shafts account for about 90% of the company's revenues.

The ability to provide a wide variety of products is one of the firm's competitive edges, since many customers are attracted by the ability to source many different items from one seller. According to Cheng, sales of related products have fueled his company's rapid growth over the past three years.

In addition to golf clubs and heads, the company also supplies other high-end products, such as bicycle forks, frames, parts, and composite carbon materials for aerospace applications. In the bicycle-fork category, the company offers full carbon forks, carbon monocoque and carbon forks. The company also supplies frames for racing and mountain bikes, seat posts, crank sets, monostays, and spacers.


Investing in Quality


In order to improve its product quality and profit margins, Advanced has made substantial investments in R&D in recent years. As a result, the company introduced many high-end golf iron heads, putters and related products that have helped boost the company's sales by 60%, Cheng says.

Advanced also owes its recent success to its decision to move its manufacturing base to mainland China. Last year its Dongguan plant posted profits of NT$340 million (US$9.7 million), accounting for more than 70% of the company's overall earnings.

The Dongguan plant was constructed at a cost of US$5.66 million. In 1999, the factory suffered a loss of NT$10 million (US$286,000) and the next year posted a profit of NT$28 million (US$800,000), according to Cheng. In 2001, the profit of the Dongguan plant jumped to NT$180 million (US$5.14 million), accounting for about 60% of the company's overall profits that year.

The Dongguan plant has also helped Advanced lower its labor costs from an original 40% of total production costs to only 15%. Currently, 18 Taiwanese supervisors manage a workforce of some 3,000 in Dongguan.

Another contributor to Advanced's rapid growth and enhanced competitiveness has been its investments in advanced management-information systems, using enterprise-resource planning (ERP) and supply-chain management (SCM) software to improve its efficiency and slash delivery times.