How a slowing economy affects companies: Cutbacks in staffing, expenses in bid to stay afloat

Staff at work at Kim Ann Engineering, which is involved in precision engineering.
Staff at work at Kim Ann Engineering, which is involved in precision engineering. PHOTO: KIM ANN ENGINEERING

As the economic slowdown weighs on sentiment and sales, companies are taking a very close look at costs in a bid to keep afloat.

"Nobody has been spared, especially in my industry," said energy services provider Mencast Holdings chief executive Glenndle Sim.

"We thought the downturn (in the oil and gas sector) would be cyclical, but it hasn't been," he added. "We need to recognise the fact that we're in this for the long haul, and have to look at what we can do to redeploy resources."

The company has had to let go of about 30 per cent of its workforce - which has helped with lowering costs - but Mr Sim noted this approach has its limits.

"Manpower makes up the bulk of our costs since we're a service company. But we also don't want to lose people with essential skills and intellectual property," he said.

Mr Lau Tai San, the chairman and managing director of speciality metals supplier Kim Ann Engineering, said the company has cut back on overtime pay.

The resulting dip in salaries has resulted in some foreign workers leaving the company - the firm's foreign workforce has fallen by 30 per cent.

"Overtime pay can come up to double workers' basic pay in good times. But when the economy is bad, we want to cut down as much as possible," said Mr Lau.

The company has been hit hard by the slowdown in the oil and gas industry, which makes up about 40 per cent of its business.

The general manager of a company in the semiconductor industry, who declined to be named, said that his firm has "taken a prudent step" of not hiring replacements for staff who leave. Its staff count has fallen by 10 per cent to 15 per cent this year.

"We're also consolidating senior management roles so the company is less top-heavy, and freezing wage increments for management. We're tightening belts and preparing for worse times to come."

Mr Sim said the company is also trying to divest assets, restructure loans, and negotiate to defer payments like rent.

Companies are also cutting back on discretionary expenses such as corporate gifts and dining out.

Kim Ann Engineering's annual company dinner is usually held at a hotel but Mr Lau opted to have it at the National University of Singapore Society's clubhouse last year - a cheaper option, he noted.

Pacific International Lines managing director Teo Siong Seng said the company is "being more discreet in our spending" - for instance, by "entertaining clients only when necessary".

The shipping industry has been hit by the slowdown in global trade and Mr Teo said his company has outsourced labour-intensive manual work - such as checking certain documents - to centres in India and China.

He added that he expects the company's cost-management efforts to be temporary.

Meanwhile, Mencast's Mr Sim is grimly holding on. "This industry has never been for quitters - people have ridden through many cycles. It's raining now, so we just have to learn how to dance in the rain."

Chia Yan Min

A version of this article appeared in the print edition of The Straits Times on October 14, 2016, with the headline 'Cutbacks in staffing, expenses in bid to stay afloat'. Print Edition | Subscribe