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DIAMOND INTERNATIONAL CORPORATION

Diamond International Corporation (DIC) is a trading company that imports

thermoplastic (PVC) pipes, valves and fittings, and is one of the leadingsuppliers of such in the country. PVC S-80 is imported because local PVCmanufacturers limit their production to PVC S-40 only since this is thematerial specified for local distribution. DIC's main clientle is thesemiconductor industry, although it has supplied large-bore PVC S-80materials to some power plants in the country.

PVC S-80 material is used in the semiconductor industry because, likestainless steel, it can withstand high pressures and temperatures in themanufacturing process involved. But unlike stainless steel, it provides the

best material against corrosion. There are other major thermoplastic materialsaside from PVC for various applications: ABS, PE, PP, CPV, and PVDF. ABSis best used for refrigeration and industrial air conditioning processes. Unlikecopper, it is non-corrosive material and does not require insulation protection.PE is widely used for water distribution in the country, usually used inconnecting homes to the main water lines. Only small-bore pipes and fittingsare manufactured locally. Large PE pipes (1m+) are imported but still isrelatively less expensive than reinforced concrete pipes which are widely useby irrigation system in the country. Large bore concrete pipes are also

imported. CPVC is material best used in sprinkler system as it is non-corrosive and can easily be maintained. Develop country have put in buildingspecification for the use of this material in for building and fire sprinklersystem. PP is used in high temperature and high acidity settings. PVDF isconsidered the Mercedes Benz of the piping industry because of itsextremely high price, but it does the best job for ultra high-pressure and high-temperature processes.

DIC was founded by a Mechanical Engineer in the mid-80s with only three

employees. Its office in Las Pinas is adjacent to a hardware store which isalso owned and operated by DIC's president. By 1990, the company hasalready grown to more than 50 employees and includes Splash Island inLaguna as one of its major projects. It has a standing inventory of PHP 15M+located at its warehouse also in Las Pinas. Under the president's name, realestate properties were acquired in strategic locations near industrial parks,with plans of futrue expansion in the areas: 2 in Sta. Rosa Laguna; 2 in TreceMartires, Cavite; 1 in Sto. Tomas Batangas; and 2 in Cebu City. Already aproperty in Cavite along the road leading to Intel is being developed to be a

mini industrial mall and technical training center. Talks are also under way todevelop the site in Batangas. The Laguna property in Bel-Air serves as anoffice/residence for the sales staff covering the CALABARZON area.

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The company has identified its three major marketing areas as follows:projects and major accounts, branches and dealership (which has yet to bedeveloped). Its Cebu branch is doing well and a MOA exist covering a powerplant project in Sual Pangasinan. Signatories of the MOA are relatives of the

president.

Its principal is a major thermoplastics manufacturer in the U.S. Untilpurchased recently by a larger conglomerate based in the U.K. It has anoffice in Singapore serving the Asian business hub. DIC imports about 2 to 440-footer vans per quarter, depending on bid requirements and identifiedprojects. It enjoys a 60-day credit line with its principal.

DIC is also a major competitor in selling high-precision screws and bearings

needed by the semicon industry. Sales from this area constitute 10 to 15percent of the company's profits. As performance incentives, DIC sendspeople to Singapore to reward them for exemplary jobs done. But in return,they have to hand-carry with them screws and bearings brought in Singapore.This way DIC avoids taxes that should be levied on such items.

Although he believes that what made DIC into a big success before still workstoday, the president has started to hire professional managers to run theorganization. But the final decision still rest on his shoulders. Major marketingstrategies come directly from his office. Important functions like accounting,purchasing and audit were left in the hands of his siblings and relatives, whohave a major influence in the president's decisions. They also serve as hiseyes and ears when he is away on trips. As a result, an atmospheric ofmistrust pervades the organization. New staffs hired come mostly fromBacolod, which also happens to be his hometown. There are only about 10percent non-Ilonggo employees in the company.. The change of personnel isdynamic with a high turnover rate. Many of his managers and sales peopleend up working for his competitors.

DIC even once conducted a free seminar in Tagaytay on the latest technologyin the thermoplastics industry to be able to identify prospective partners infuture MOA's. The main speaker was the regional manager of its principalbased in Singapore. Although DIC participated at a construction exhibit at theWorld Trade Center once, the president does not really believe DIC and theproducts it carries need that kind of exposure to increase market share.

There have been plans but nothing has materialized to distribute its productsin Cebu and Davao through dealers. Prospective distributors are Chinese-

owned businesses in the construction industry.

The president has started to transform a large property in Las Pinas inside a

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private subdivision, where the head office is now located, into a mini mall aswell. Bet an architect's services was not used in designing the structure,hence the building's aesthetics suffered and continues to remain half-filled.

For his industrial expansion, DIC's president plans to attract investors through

MOAs, offering commisions and profit-sharing for their professional services.Most of these prospects are mechanical and instrumentation engineers withbackground in the semicon industry.

DIC is restructuring its loans with banks for major expansions. A couple ofcompanies have already been set up and doing business, with DIC serving asmajor stock holder.

The president has also started expanding to consumer and non-industrial

businesses including a drug and general merchandising store. He is sellingthis concept to prospective investor-franchisees. He is also offering spaces inhis building at relatively low rents for a profit sharing scheme to attract newclients.

Prior to the turn of the millennium, DIC is a facing a lawsuit from its principalfor non-payment of a shipment of a particular inventory. DIC claimed that theproducts delivered (valves made of PE material) failed a major client'spressure test and were rejected for future use, contrary to the manufacturer'sclaim that it can withstand such. The principal wants the goods just to beshipped back to Singapore then, but could not reach an agreement with DICon who will shoulder the freight charges. When DIC finally agreed to ship thegoods at its own expense, the principal does not want it anymore since thetechnology has already been outdated (outmoded thermoplastic products aredestroyed and burned in Singapore, a less expensive way than keeping themon stock). All this has taken no less than 3 years.

Also, a sale of property in Las Pinas that has been sold to a foreigner couldnot push through because it has been attached to the suit filed by the

principal. The proceeds of the sale could have been used for an out-of-courtsettlement with the principal. The president also found out that amortizationpayments for a short-term bank loan made in Cebu have not been remittedfor more than a year. DIC has also asked its lawyers to file a suit against itsMOA partners in Pangasinan for non-remittance of certain payment. Itsmanpower has been reduced drastically; those who have not yet reached 6months working with the company were given walking papers. DIC was alsohit by a general showdown in the industry as a result of Asian crisis in the late90s.