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Interview

Heinrich Jessen, Chairman, Jebsen & Jessen SEA – Aw Chin Leng, Regional Managing Director, Jebsen & Jessen Offshore, Singapore

11.06.2014 / Energyboardroom

Jessen & Aw_Focus Reports copyJebsen & Jessen SEA chairman Heinrich Jessen, and Jebsen & Jessen Offshore regional managing director Aw Chin Leng, provide an insight into the family-owned groups’ cenand its continued expansion across three generations in the ASEAN region. Following the acquisition of Halcyon Offshore, the executives also discuss the industrial group’s strategic venture into the offshore and marine sector and their ambitions to develop the new unit into a recognized world-class player.

Mr. Jessen, could you please begin by providing our international readers a brief overview of the organization and its scope of activities?

Heinrich Jessen (HJ): Jebsen & Jessen South East Asia (SEA) is an industrial group with over fifty years of experience working in partnerships with global market leaders and capitalizing on opportunities throughout the region.

We form part of a global family enterprise that dates back to a trading partnership formed in Hong Kong in 1895. In the second generation of the business, the family shareholders decided to expand their foothold beyond Hong Kong and China into South East Asia. It was then that my father came to Singapore in the early 1960s and established what evolved from a trading company into an industrial enterprise. Today, we operate eight independent business units spanning manufacturing, engineering and distribution activities. The core business units include Cable Technology, Chemicals, Communications, Life Sciences, Material Handling, Offshore, Packaging and Technology, composed of a healthy mix between our own in-house products and brands from global technology partners. Together our businesses employ over 4,300 people, operate in nine of the ten ASEAN countries – The Association of Southeast Asian Nations – and serve over 20,000 customers in the region and beyond. Turnover for the group in 2013 amounted to approximately USD 1bn.

Each of the business units is autonomously operated by its own managing director, all of whom report to a three-member executive board. Most distinctively, however, the back office functions of the eight business units are unified and managed on both a regional and country basis, which enables us to reap the benefits of economies of scale.

As an independently run enterprise, what is the glue that binds the group together?

HJ: Besides the integrated back office, we are also held together by a shared set of values and policies that we operate with. In addition to this, we share access to the same financial pool of resources and a common talent pool as well.

How would you describe the strategic importance of Singapore to the group and its offshore business unit?

HJ: As a locally-based entity, Singapore is of significant importance to Jebsen & Jessen (SEA) as its regional headquarters. In terms of group wide business activity, although Singapore is amongst our larger markets. Across the region Thailand and Malaysia are our largest markets and Indonesia is on track to becoming a significant source of business for the group.

However in terms of the offshore market, it comes as no surprise that the city-state is of paramount importance given the nation’s international leadership in the segment and the concentration of offshore businesses here.

Aw Chin Leng (ACL): Owing in part to Singapore’s unique geographical positioning at the cross-roads between East and West, the country has evolved into an internationally recognized offshore and marine hub. In particular, Singapore has become a critical node for the maintenance and repair of offshore and marine vessels, as well as the world’s largest bunkering hub. Furthermore, Singapore is home to two of the world’s largest jack-up rig manufacturers and commands a leading position in the FPSO conversion industry. Naturally, this created a pull in the market and attracted a slew of both clients and suppliers that now compromise the island-state’s rich offshore cluster. That dense ecosystem of offshore and marine industries makes Singapore an important oil and gas hub for players across the value chain, including Jebsen & Jessen Offshore.

Mr. Jessen, under your stewardship, you put into action an extensive growth strategy back in 2010. What were the goals you were seeking to achieve, and what progress have you achieved thus far?

HJ: A unique attribute of Jebsen & Jessen (SEA) is its world-class back office infrastructure, which is deployed across the region. Although the investment into such a setup is expensive, we found that the costs do not really increase much with any increase in business volume. Hence, if we could scale up this unique infrastructure with higher levels of income flowing through the system, we could achieve much more profitability. The goal of our so-called ‘double in five’ strategy was to double our bottom line within five years’ time by enhancing our revenues. Although we have not yet reached the five year deadline, we are on track towards meeting our goal.

Over the past four years, we have successfully integrated seven new companies into our group, of which Halcyon Offshore, now Jebsen & Jessen Offshore, is one. Interestingly, study after study puts the failure rate of mergers and acquisitions (M&A) above 70%. However we certainly have not experienced such failure, which is all the more interesting because we traditionally have not engaged in M&A activities, with this mode of functioning being a relatively new concept for us.

Mr. Aw, having recently joined Jebsen & Jessen Offshore in February 2014 and, assuming that now the consolidation phase of the acquisition is now firmly behind you, what are the next steps for the business?

ACL: 2014 will be a year of consolidation of the offshore business unit into the Jebsen & Jessen (SEA) Group of Companies. This will set the course for subsequent growth and expansion of the topline and bottom line of the business unit starting 2015 onwards. As part of that heading, we are committed to understanding the prevailing market dynamics and expanding our customer base, as well as enhancing efficiency and eliminating waste. In other words, we intend to transform Jebsen & Jessen Offshore from its current market positioning into a tier one company.

HJ: Indeed, positioning Jebsen & Jessen Offshore as a tier one company is key. When we acquired Halcyon Offshore, the company was essentially an amalgamation of numerous small entities that had been merged together by Halcyon. Since purchasing the company, we are effectively taking that integration process a step further in a bid to fully integrate the entire operation as opposed to having numerous entities, each with their own systems. In doing so, we intend to transform the organization from being a fabricator in the offshore and marine industry, into a tier one supplier of strategically selected products and services.

ACL: More specifically, Jebsen & Jessen Offshore products include a variety of lifting and pulling equipment, offshore cables and service response. Operating across three divisions: equipment, distribution and response, we also provide an extensive suite of engineering, fabrication, construction, installation and commissioning services to owners and operators of offshore and marine vessels, as well as major shipyards.

Our equipment division, for instance, is one of the largest manufacturers of offshore winches, cranes, A-frames and complex deck machinery systems in Asia. Besides these signature products, we have also made extensive inroads into mooring systems designed specifically for FPSOs and other large vessels. Assuming all goes according to plan, we expect to make significant headway as well into this market in the short term future.

Is Jebsen & Jessen Offshore targeting any specific geographical areas to tap into offshore and marine investments?

ACL: As an equipment provider, we are not necessarily bound to any specific geographical area. As long as we are able to gain clients’ recognition and appear on their list of approved vendors, the locations we can cater to are unrestricted by locality.

In terms of international capital investments, we see that a lot of the offshore E&P spending is currently centered in areas including the Americas and Africa as well as in the deepwaters off of Australia and Malaysia. Although our products have traditionally been focused on shallow waters, we are now also geared to cater to clients operating in the deepwaters as well. All of our active heave compensation products, for instance, from winches and cranes to mooring systems have all been developed to address the needs of our clients as they venture into these more challenging environments.

HJ: Although we are an ASEAN group, two business divisions of Jebsen & Jessen Offshore will extend its reach beyond this region. In addition to providing equipment on a global level, we are dedicated to internationalizing our response unit as well, it being in essence the service arm of the offshore business. As a group, we have long enjoyed a very strong market leadership with the servicing of cranes in South East Asia through another of our business units, MHE-Demag, and we intend to mimic this leadership in Jebsen & Jessen Offshore as well. Because good service in our business is all about being where the vessels accumulate, we established a service center outside of the ASEAN region in Dubai, UAE in a move to enhance our international presence. This is part of a larger plan, and we are exploring opportunities for other service points in international vessel accumulation points including West Africa and Europe. Jebsen & Jessen Offshore is, therefore, one of the businesses that we have global ambitions for, well beyond the ASEAN region.

Succession statistics in family businesses point to an alarming trend – only about 30% of family and businesses survive into the second generation, 12% are still viable into the third generation. As head of the third generation successor of the company, what elements do you believe have allowed Jebsen & Jessen to be a part of the illusive minority?

HJ: The trap that many family businesses fall into is having inadequate succession plans, often leading to the ownership of the business being passed down by inheritance to a multitude of children in an effort to appear “fair”. This can lead to a situation of having too many small decision makers who often have conflicting interests. We have always stuck to the simple principle that shares are purchased, not inherited, and only those who work in the business can be shareholders.

In our case there is another factor. We as a group operating in the volatile region of East Asia have repeatedly experienced the first generational phase again and again because of all of the crises we have endured, from the First and Second World Wars to the Cultural Revolution in China. In a way, these events reverted the family partners of the business back to the entrepreneurial first generation stage. From that point of view, I view our family as currently being at the cusp of the second generation.

Looking ahead, the primary goal of our current generation is to pass on a business that is better than how we had found it when we first took over. In doing so, it is important to have a clear set of rules. I believe family businesses tend to fail with time because they either lack rules or have rules that are not clearly communicated or structured. In our case, our success can in part be attributed to the explicit set of succession rules that we’ve into place since the very beginning, and we intend to adhere to that well into the future.

As Jebsen & Jessen (SEA) celebrates its 50th anniversary, while Jebsen & Jessen Offshore celebrates its 2nd as part of the family, what are your individual ambitions with your areas of responsibility?

ACL: For us at Jebsen & Jessen Offshore, we aim to set the business in the right direction towards growth. In doing so, we seek to develop the talents of our people while expanding our network base and exploring international opportunities to strengthen our global reach.

Ultimately, our goal is to mold Jebsen & Jessen Offshore into a reliable and trusted supplier of tier one products and services. All things considered, I am confident that we are on the right track to doing so and expect to get there in three to five years’ time.

HJ: For Jebsen & Jessen (SEA) group, our medium to long term goal is to increase the degree to which we are the masters of our own fate in terms of technological capabilities. We are actively working towards reducing our reliance on the technologies of international partners and substituting those with our own in a bid to generate higher levels of locally added value across all our business units.

Jebsen & Jessen Offshore is a perfect illustration of these ambitions because of its capacity to domestically develop its own range of expertise and that is in part why we followed through with the acquisition. As we consolidate the offshore business unit, we are keen to transform the company into an internationally renowned tier one player, which is also why we invited industry veterans like Mr. Aw Chin Leng to head the business. To be a tier one player, you need tier 1 people and products.

To read more articles and interviews on Singapore, and to download the latest free report on the country, click here.

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