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From Nuts To Metal: Oriental’s Bid For A Turnaround
In the Spotlight | 30 April 2012
By: Simeon Ang
Articles (125) Profile

If at first you don’t succeed, try, try again. In this case, Oriental Group is trying a different path. Previously known as Oriental Food Holdings, the company had dabbled in the peanut product manufacturing business but had seen rising raw material prices, intense competition and a challenging operating environment eat into margins. The company had previously reported 4 straight full year losses and was seeking to turn this around. On 18 January 2012, after an extraordinary general meeting, the company took a significant step to attain shareholders’ approval in divesting its former business in pursuit of a new direction.

The company then, saw a viable business opportunity in the procurement and supply of industrial and construction materials industry, in particular, the steel manufacturing and trading business. In further testament of its resolve to succeed in this industry, the company, had on 10 April 2012, signed a memorandum of understanding with Anhui Zhetai Stainless Steel Group to commence negotiations for the establishment of a new joint venture (JV) company in Singapore. Based in Bengbu City, Anhui province of China, the Zhetai Group manufactures and sells stainless steel products such as stainless steel seamless pipes, round bars, plates and coils which are used in the construction of large scale engineering projects in the oil and gas industry, as well as for the construction of ships, bridges and electrical towers.

After more than two and a half weeks of negotiations between the two parties, a JV agreement was penned on 27 April 2012. The JV agreement gave birth to a new entity, Oriental Zhetai (S), which will be jointly owned by Oriental (51 percent) and Zhetai (49 percent).

Gathering of senior management and directors of Oriental and Zhetai

In the initial phases after its incorporation, Oriental Zhetai is intended to act as a third party distributor in the distribution of products of Zhetai Group. In due course, the two partners foresee Oriental Zhetai expanding its business to include other products as well as cultivating ties with other clients.

Separately, Oriental Group sought to add further credibility into its board of directors and management team as it welcomed the appointments of Wu Dingrong as its new non-executive chairman and Sun Lv as chief operating officer of the company on 27 April 2012. The company said that both individuals have accumulated extensive knowledge and experience in the steel business.

Newly installed non-executive chairman, Wu Dingrong gives his speech

Notably, Oriental’s JV partner, Zhetai Group’s chairman, Zheng Shuhua, mentioned during the JV signing ceremony, that he was particularly eager to work with Wu Dingrong as they have co-operated previously in separate business engagements.

Zhetai Group chairman addresses the audience

Following the JV signing ceremony, smiles illuminated throughout the room as hope of a turnaround for Oriental Group were kindled together with excitement and anticipation at the milestone that was just marked. Determined to not rest on its laurels, newly installed chairman, Wu Dingrong said that the Oriental Group will continue to explore more investment opportunities to sustain long term growth for its shareholders.

Smiles all around as Oriental and Zhetai complete the signing of the JV agreement.

Simeon, an LSE graduate, is currently the editor of Aspire. He specialises on topics surrounding trading psychology, politics and macroeconomics.

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