The Rupp Report: Fong’s Reshapes Its Organization

In recent weeks, the Rupp Report has informed readers about companies, facing crisis, doing their
homework and preparing for the future. A recent example occurred during ITMA Asia CITME 2010: The
Hong Kong-based Fong’s Industries Group invited the international trade press to a press conference
to announce it is restructuring its marketing and sales organization.

Fong’s was founded in 1963 by Fong Sou Lam to produce dyeing and finishing machinery. Over
the years, Fong’s grew and was the first Asian company to acquire famous European brands.

European Acquisitions

In 2002, Fong’s formed Xorella Hong Kong Ltd. to acquire Switzerland-based Xorella AG, a
designer and manufacturer of steam-setting and conditioning equipment for yarns and fabrics. To
enlarge its portfolio of dyeing and finishing machinery, the group acquired in August 2004 Then
Maschinen- und Apparatebau GmbH and Scholl-Then GmbH, both based in Germany, and consolidated them
into Then Maschinen GmbH. And in April 2006, Fong’s founded Goller Textilmaschinen GmbH to acquire
the fixed assets, inventory and intellectual property of GTM Goller Textilmaschinen GmbH, Germany.

The Fong’s Group employs some 5,000 people, has more than 7,000 customers around the world
and annually produces more than 2,200 sets of dyeing and finishing machines.

New Sales And Services Strategy

At the press conference, Then Director Thomas Archner provided information about the new
sales, marketing and services approach. He explained how this new approach will affect the
structure of Fong’s sales and services organizations and how this new strategy will impact its
European operations.

“The time for lonely players is over,” Archner said. “More than ever, textile producers rely
on total solutions compatible with their entire production chain. It is often the case that
machinery manufacturers are acting like a general contractor.” Up to now, Archner explained, the
members of the Fong’s Group — mainly Fong’s, Then and Goller — had in most cases their own sales
teams, which at times has led to overlap or a lack of information among group members. Also, the
group experienced tough times in the past two years and discussed how one could improve the
response to market and customer needs. According to Archner, the strengths of the Fong’s Group are
strong brands like Fong’s, Then, Goller and others; its role as a well-known and respected market
player with all its brands; state-of-the-art technology; and its total customer orientation with
dedicated manpower in the group’s organizations.

The conclusion of the discussions was to rebuild the Fong’s Group into an efficient sales and
service organization with the strong brands being structured to form product groups.

Joint Sales Force Strategy

Archner said that in the past, the three brands had their own sales organizations and mostly
separate sales agents in countries worldwide, offering only the respective brand. In the future,
there will be one sales team providing information for all three brands. However, the intention is
not to reduce any capacity in the sales organization. Despite this change, the sales staff will
have much more time to focus on fewer markets in which they are responsible.

One Agency Per Country

Archner mentioned that Fong’s National, Then and Goller have agreed to work through one
master agency per country to unify the strengths of the technologies. These changes are what the
market has expected, and the customers will benefit from the new arrangement. This new move is
promoted with the motto: “Think complete, think Fong’s.”

Archner said the group’s strengths for the markets include having an entire product portfolio
from one source and strengthening the focus of existing sales forces in all markets worldwide, thus
resulting in a streamlined but more efficient organization.

Product Groups

The three brands Fong’s National, Then and Goller will be organized into product groups, each
one responsible for its respective bottom line and having its own manufacturing sections. These
groups would allow increased concentration on technological enhancements for existing product
ranges and new product development.

Some products are technologically demanding, and the users need in-depth advice that may
result in further investment in machinery. Archner mentioned if there is need for technological
consultation, product managers will support the sales colleagues and focus on the technical part of
those projects.

New Sales Organization And Legal Structure

The new sales organization divides the world into two parts: East and West. The East, which
covers the major Asian countries and territories, will be served by the Hong Kong and Shenzhen,
China, headquarters. The West — which covers Europe, Africa, and North and South America — will
be served by an office in Schwäbisch Hall, Germany. It is intended that all customers worldwide
will get an immediate response to any request relating to the three brands.

This new organization has a new legal structure: Parent company Fong’s Industries Co. Ltd.,
with its principal place of business in Hong Kong; and subsidiaries Fong’s National Engineering Co.
Ltd. and Fong’s Europe GmbH.

Fong’s Europe GmbH

Archner explained that in the course of developing this new sales and marketing strategy, it
was decided to merge the two European subsidiaries of the Fong’s Group’s European subsidiaries Then
Maschinen GmbH and Goller Textilmaschinen GmbH into Fong’s Europe GmbH. Fong’s Europe is
responsible for handling the West sales territories. As well, it will take part with its respective
employees in activities that mainly include after-sales service, product management, manufacturing
and R&D, supported by finance and administration.

The setup of Fong’s Europe GmbH is as follows: Then Maschinen GmbH was renamed Fong’s Europe
GmbH. Effective July 1, 2010, Goller Textilmaschinen GmbH was merged into Fong’s Europe GmbH.
Headquarters are located in Schwäbisch Hall, and there is a branch office in Schwarzenbach,

Fong’s Group East

Walter S.W. Leung, sales director, overseas, Fong’s National Engineering Co. Ltd., Hong Kong,
discussed recent business developments and sales strategies of Fong’s National, noting that the
company has won recognition and excellent goodwill from its textile industry customers,
particularly in the Asia-Pacific region. “With its strong foothold and the new sales organization,
the Fong’s Group will undergo a new worldwide sales and service strategies in the coming months,”
he said.

Fong’s National, with Leung as its director, is responsible for sales and services in the
East, including India, Bangladesh, Indonesia, the entire Asia-Pacific region and surrounding
countries as far as New Zealand, with the exception of Mainland China. Fong’s National’s sales
organization comprises the sales force from the Hong Kong headquarters, the Macau trading office
and the Thailand office.

Enhanced Asian Services

In addition to the Hong Kong and Shenzhen headquarters, Fong’s National established various
after-sales service centers to provide complete, effective and timely customer service in the major
Asian markets. There are local service teams in Bangladesh and Indonesia. The Thailand office
handles the Thailand market and the Association of Southeast Asian Nations (ASEAN) region covering
Vietnam, Cambodia, Laos and Brunei. In 2006, Fong’s Technical Service (PVT) Ltd. was established in
India, with centers in New Delhi, Mumbai and Tirupur to cater the growing Indian market.

To cope with the new sales strategy, the agency networks were consolidated in most of the
East markets such as India, Bangladesh, and Indonesia etc, so that “one-stop shopping” could be

Leung reported that for the Mainland China market, Fong’s National offers strong sales forces
and technical support from the Hong Kong and Shenzhen headquarters. In addition, regional sales and
service offices were established in Shantou, Fujian, Shaoxing, Changzhou, Nantong, Shanghai, Wuhan
and Qingdao.

The Future

For the future, Archner and Leung are convinced that with the new sales organization, the
Fong’s Group will be in a much better position to further explore and open up new overseas markets.
But another big step is ahead: In 1991, the Group acquired a 110,000-square-meter (m
2) site in Buji, Shenzhen, for new production facilities that came on line in 1995. In
2007, Fong’s acquired approximately 833,000 m
2 of land in Zhongshan, Guangdong Province, China; and plans to build a new
manufacturing complex there in order to expand production capacity.

The reasons for the new structure, said Archner and Leung, are clear: “The aim is to secure a
sustainable growth of the Fong’s Group in the worldwide markets by being much closer to its
customers. The relationship with the customers is seen as a business partnership. Only if the
customers are successful in their respective businesses then the Fong’s Group has the chance of
becoming successful, too.” That is true, and time will tell.

July 27, 2010