Tuesday, August 29, 2006

Export financing

Mia de Faustman borrowed P3.5 million to ship more pieces of jewelry to Europe.

By Jaclyn Lutanco-Chua

Mia de Faustmann grew up watching her mother create custom jewelry, so when she put up on her own business with a friend, Ma. Luisa Diokno-Unson, in 1979, they decided to export jewelry and named their company Unson Faustmann and Company. "Our goal was really to get into the export business," Faustmann says. "We felt that jewelry was worth venturing into because, if you failed to sell your pieces, you could still recycle the metal. Plus, jewelry appreciates rather than depreciates in value."

Unlike her mother, de Faustman decided to mass-produce jewelry instead of customizing a few pieces for different women. "We felt it was a lot easier to talk to one buyer and do 100 pieces of one thing than to talk to 100 different ladies who each wanted something different," she says. And to get the business going, they spent P5,000 each to buy hand tools and basic raw materials to produce samples. "We read all kinds of books," Faustmann says. "Whenever we went abroad, we always visited the bookstores, and if a book we wanted was too expensive, we just sat down on the floor and copied the formula that we needed!"

Their first client was a jeweler in New York that they met while participating in the Manila FAME trade exhibit. But when the partners parted 18 years later-in 1997-Faustmann and her husband started Seven Castles Inc., a company that now produces 30,000 to 40,000 pieces of silver jewelry a month compared with Unson Faustmann and Company's 1,000 pieces in its early years. In 1998 the Faustmanns put up a retail outlet in Greenbelt, Makati, to promote their own brand, Michelis. Later, they opened other outlets at the Mandarin Oriental, Manila, Shangri-La, Makati, and in the jewelers' row in Greenhills, San Juan. They now have 275 piece workers in their Antipolo workshop and 30 administrative employees in their Quezon City office.

Seven Castles exports mostly to the U.K., Italy, Spain, France, and the United States, and is trying to gain at least two clients per country. It ships out between $250,000 and $500,000 worth of orders in the July-October peak season, but "The problem with jewelry is that everyone wants it all at the same time-for Christmas," Faustmann says. "And orders often come in out of the blue because clients don't plan ahead." Indeed, in 2002 Seven Castles' purchase orders once jumped from P1.2 million to P2.2 million without warning. Pressed to meet the sudden demand, Faustmann decided to take out P3.5 million in revolving credit from the Philippine Export-Import Credit Agency. The money was payable in 180 days at 9.1 percent interest-lower than the rate being charged by other banks. To secure it, she pledged the company's plant in Antipolo and used the money to buy silver and other metals from Meycauayan in Bulacan.

That year, Seven Castles' production almost doubled, and in 2003 the Faustmanns tapped their credit line and borrowed P5 million (at 11.28 percent interest) to meet another surge in demand. "This year is not as good because everyone is hurting," Faustmann says. "But we try to keep a balance by producing different styles of jewelry, so that if one style doesn't do well, the others will."

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