Four abiding tenets have ruled life and business alike for Luen Thai Holdings CEO Henry Tan, as he recounts to Sophie He.

Henry Tan, chief executive officer of garment manufacturer Luen Thai Holdings Ltd, said integrity, trustworthiness, dedication and diligence define his business philosophy and also the core values of the company.

Luen Thai is a family business, the biggest portion of which involves manufacturing - also the major portion of their Hong Kong-listed business (Luen Thai Holdings), Tan told China Daily.

In recent years, Luen Thai has also ventured into retail and real estate on the Chinese mainland, and the company has a large fishing business in the Pacific, under the umbrella Luen Thai International Group, he added.

"(In) the whole manufacturing business, we employ about 45,000 employees globally, and the turnover is about $1.2 billion every year."

Tan, 62, has been working for the family business since he was 19. He has a Master's in Business Administration and a Bachelor's in Business Administration from the University of Guam, which awarded him an honorary Doctor of Humane Letters degree in 2013. "I went to Guam because the family has a shipping business there, we were a shipping company back in 1965, and my father asked me to go to Guam."

Working in the family is good, Tan said, but admitted it also has its challenges. His brothers and sisters work together, and they often get together to "brainstorm".

"There is a Chinese saying: It's much easier to break a pair of chopsticks than to break a bunch. I think it is true."

He said the family business has now diversified into many sectors as his six siblings have diverse businesses in different places. He recalled that his father used to tell him and his siblings that they have to be honest, trustworthy and diligent in whatever business they undertake.

"It has helped me a lot in my career and in my life, being honest makes people trust you; things don't happen naturally, you have to be hardworking to achieve what you need, these are the core family values that we have," said Tan.

Tan said that currently some of his four children are also working for the family business, mostly in Hong Kong, while one is about to move to Shanghai, to help with the retail business, as Shanghai is the center of the mainland retail market. "They are all great kids, I am really proud of them," He said.

Steadfast integrity, trustworthiness, dedication and diligence also make up Tan's business philosophy, and he encourages his executives and employees to achieve the same standards.

Tan said he relies on the company's incentive system to keep employees motivated. "We need to make all our employees feel that this is their business, so we have an incentive scheme, to motivate them to hit the target."

Asian expansion

Tan said that during the past two decades or so, many things have changed in the manufacturing business.

"We are selling garments and bags. In the old days, the major portion of our manufacturing business was on the Chinese mainland. With costs increasing during the past few years, we have continued in diversifying our production base in Southeast Asia," he said.

Tan said that the company operates in the Philippines, Vietnam, Cambodia and Indonesia, and also in India and Bangladesh.

"We used to have 70 to 80 percent of our production capacity on the Chinese mainland. Now, 60 percent is overseas and I do expect our overseas production to continue to increase."

In recent years, Luen Thai has expanded into bag manufacturing - producing for upscale brands including Coach, Michael Kors and Kate Spade. It also makes a variety of computer bags and backpacks.

Slightly under 50 percent of Luen Thai's garments and bags are sold to the United States, 30 percent to Europe, and 20 percent in Asia, mainly on the Chinese mainland and Japan, said Tan.

"In recent years, the changes, it's not just costs, you must have heard about the Trans-Pacific Partnership (TPP) which was recently agreed by 12 nations. It is our belief that production will be moved to where it is duty-free."

Duty rate for garments and bags is between 10 and 30 percent, said Tan, stressing that the margin for manufacturing business is not so high. Therefore he believes that production will continue to shift to duty-free locations.

Future in the bag

Vietnam will be the biggest beneficiary of the TPP, and a lot of production will move to that country as it is duty-free, he said. Luen Thai has some production facilities in Vietnam, but a large portion of production takes place in the Philippines.

"We will continue to expand in those countries; as for bag manufacturing, in the Philippines, Cambodia and Indonesia, bags will be duty-free."

He said the company is expanding quickly in the bag manufacturing business. Staff numbers in the Philippines will probably be increased from 4,000 or 5,000 to above 10,000 in the next 12 to 18 months. Rapid expansion plans are also underway for Cambodia, making computer bags and back packs, while luxury bags will continue to be manufactured in the Philippines.

For the six months ended June 30, Luen Thai Holdings' profit attributable to owners of the company hit $7.36 million, a plunge of 55.2 percent compared to the same period a year ago.

The slide was attributed to the unsatisfactory performance of the firm's casual and fashion apparel division, according to a statement filed with the Hong Kong Stock Exchange. It said the poor showing from acquired company Ocean Sky Group, due to revamping of factory operation and redeployment of staff in Cambodia, hurt the gross margin and therefore the net profit under the casual and fashion apparel division. Also, orders placed by a major Japanese customer in the first half of 2015 were slashed beyond original expectations, thus affecting the division's bottom line.

Profit margin for the period also declined from 2.9 percent a year ago to 1.4 percent. Revenue was $522 million, a fall of approximately 7 percent from the same period last year.

Contact the writer at sophiehe@chinadailyhk.com