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PT Sritex: world-renowned quality in textiles

Interview - January 22, 2014
PT Sritex is the perfect example of an Indonesian success story. Established as a small trading company in 1966 by H.M. Lukminto, PT Sritex is today the largest integrated textile industry in South East Asia in terms of sales, serving 55 countries worldwide. Apart fashion and work apparel, PT Sritex specialises in clothing for the military, and supplies uniforms to more than 15 countries. Son of the founder and President of PT Sritex, Iwan Setiawan Lukminto, speaks to Worldfolio
In June 2013, PT Sritex issued a successful IPO where you floated a little over 30% of your shares and raised around 130 million USD. How happy are you with the outcome of the IPO and what do you plan to do with the capital that you raised?
The IPO has been very successful. Our investors trust Sritex, because we have a good name and diversified products. There are two reasons we issued this IPO. First of all, we want to finance the expansion of our spinning and garment division, because demand has been high. With the funds that we have raised from the IPO, we want to acquire PT Sinar Pantja Djaja, a company that already belongs to the group company. The second reason is that it is easier to raise money through the capital markets.
An IPO is a challenge, because you have to be perfect all the time, which puts more pressure on the management. However, it is also a trigger that benefits the shareholders and stakeholders. People are watching and for family businesses like ours, it is very important to be transparent. That is why we are supporting good corporate governance, so that we have more transparency and a clear structure for the long term.
PT Sritex has two main lines of business in military and commercial segments. What is the ratio between those two activities? 
Defense accounts for about 30% of our business and it continues to grow. We are experiencing a similar pace of growth in our commercial business in fashion and the production of corporate uniforms for companies like DHL, SODEXO, and Maybank.
Let us focus first on your defense business where you provide military uniforms to over 30 countries worldwide. When did you start your cooperation with the Indonesian Army (TNI)?
TNI has been a partner since 1990. We have been very successful in making new designs and producing better uniforms for the Indonesian Army. Our mission is to deliver quality and we put quality first. We do not want our soldiers to suffer. We have a moral responsibility to take care of our soldiers and make them happy and motivated in their uniforms. When they are happy, they are more disciplined and they will serve our country better too.
In 1994 you started producing uniforms for the German Army. How did you penetrate the military equipment market in Germany?
The German Army heard about us and contacted us. For two years, we worked on research and development, and we made a sample of a camouflage fabric for the German Army uniform. When we finally succeeded, a German inspector came to do the inspection and concluded the following: firstly, our quality of our garment was better than that produced in Germany; secondly, our lead-time was good; thirdly, our product was cheaper than the ones they had before; and fourthly, our equipment was better. 
Currently we supply military uniforms to over 30 countries around the world. Only 5% of our military uniforms go to TNI, while the remaining 95% of our production is exported. We are also designated to be the official partner outside Europe to produce military uniforms for NATO. Besides that we also manufacture uniforms for Indonesian and international companies, as well as uniforms for government agencies. 
In regards to the military equipment, what are the unique features of your products? What role does research and development (R&D) play in the creation of your products?
Our R&D has a close link with the R&D of several armies, like the Indonesian Army, as well as the NATO armies. So we exchange technology and knowledge with them. However since the defense industry is a strategic industry, we are very discrete. Our company stands strongly on confidentially and we always put a Non-Disclosure Agreement in the contract to provide protection for exclusivity.
For each country we carry out research and development, so we can customize the uniforms to the conditions of the country. For example, we look at the weather and other challenges like diseases that are common in a certain country. We also look at the safety aspect. We need to have a clear understanding of the conditions of the country. By doing so, we reduce the total costs for our customers.
Our management puts a lot of effort into R&D in cooperation with the customer. Together with the users, we are learning to develop and innovate. Sritex owns patents on advanced materials such as insect repellent fabrics, fireproof fabrics, anti-infrared fabrics and CBRN (Chemical Biological Radiation & Nuclear) fabrics.

PT Sritex was also able to penetrate the fashion industry internationally and your clients include top retailers and brands worldwide. Tell us more about your current commercial activities and your plans for the future?
We started to export fashion wear around 1988, and by 1990 we started exporting to the US as well. Our raw materials come from Indonesia (60%), but also from America and other countries. Over time we established partnerships with leading international fashion brands in the US, Europe and Japan. In the US we mostly supply big chains, like Walmart, JC Penny and Uniglo. Companies in the business of commercial fashion are more aggressive than in defense. They are always looking for the lowest costs.
In the near future, hopefully within two years, we want to start our own retail business with our own brand, and market it domestically as well as internationally. It will take time, because we need to stabilize everything first, management needs to be ready and we have to be ready capital wise. 
Can you tell us more about your facilities; what are the main benefits of having the whole production process fully integrated under one roof?
We started to transform our facilities in 2010. Old technologies were replaced by new technologies. The efficiency of our manufacturing here is significantly high now. Being under one roof allows us to have no transportation costs and we have established strategic distribution points in order to deliver the products to the customer on time. This creates customer satisfaction, which is also one of our strategies to rise above our competitors. 
With 40,000 employees, Sritex group plays a significant role in the economic and social development of the surrounding community. What is your approach in terms of commitment to human capacity building and job creation?
In regards to our workforce, to me they are our pilots, they are my partners, and they are my family. At Sritex Group we enjoy the spirit of teamwork. Our employees are very positive and motivated to meet the requirements of our customers. A lot of our employees come from the local community here. They have a future in the textile industry. Our employees are experts in textiles, they are valuable assets for our company and they also serve the customers.
As part of your commitment to develop the local community, the Lukminto family also opened a school in Solo. What was the vision behind the establishment of that school?

My family founded the Singapore Piaget Academy six years ago. The education we offer is from kindergarten to high school. In the community of Solo there are other schools, but we want to offer better quality education at a better cost. As we want to globalize, we set up a school with Singaporean international standards and the curriculum we offer is Indonesian, as well as international. 
Like I mentioned, family is very important to us. Family is in a way the smallest country and you can always rely on your family. One of the reasons why my father wanted to build this school is to take care of our families. By offering a curriculum that is Indonesian as well as international, we are able to offer our children education with international standards, without them having to go abroad and leave their parents. This way they can stay close to their families. The school is not only open for children from the community, but also for children of expats.
In the future, we also want to open a university, but it will not be related to the school for the community. This university is for Sritex and it will be called the Institute for Textile, Fashion Technology and Design. It will be located in Yogjakarta. We are still in the phase of consulting and conducting feasibility studies. The university will not specifically for our employees, but it will also be open to the public for career development.
The aim for this university is to increase textiles expertise. People do not know about textiles and what this business is about. For example, in Europe there are hardly any factories in this field anymore. If we do not take care of our industry, the knowledge about textiles will eventually be forgotten. I want to build this university with our retailers, manufacturers, laboratories, policy makers, lawmakers, fashion designers, and everybody who is part of the textile industry.
There is another textile university in the country, but they are very conventional. We want to be connected with reality and the job market. I believe it is essential to connect the job market with education.
What is your vision for the future of Sritex?

We want to be the largest, most reputable and most trusted, global integrated textile and garment player. To achieve our vision, we have formulated mission statements. To start with, our customers are number one for us.

That is why we want to deliver the most innovative products in accordance to customers’ needs and requirements. Secondly, we want to be a profitable and growth-oriented company for the interest of all stakeholders – society, investors, and shareholders. Thirdly, we want to provide and maintain a conducive working environment for our employees. And fourthly, we want to contribute and enhance value to the surrounding community.