Cheng Shin Rubber Industry Co (正新橡膠), the world’s ninth-largest tire maker, yesterday said it is to continue investing in marketing, and research and development (R&D) this year, while expecting volume recovery for the rest of the year.
The Changhua County-based company said it is building two more plants in India and Indonesia to meet demand. Cheng Shin operates 10 production plants in Taiwan, China, Vietnam and Thailand.
“The company’s Kunshan plant [in China] has reached its full capacity and the Xiamen plant will need to increase production to fulfill the needs of our clients,” Cheng Shin assistant to vice president Richard Lo (羅永勵) told an investors’ conference.
The Kunshan plant is Cheng Shin’s biggest plant, contributing 21 percent of the company’s total revenue last year, followed by the Xiamen plant, with 19 percent in revenue contribution, as well as the plants in Taiwan, 14 percent, and in Thailand, 12 percent.
The company, which produces and markets tires under the Cheng Shin and Maxxis brands, sells its products in more than 180 nations, company data showed.
Last year, Cheng Shin saw its business grow in both the Asia-Pacific region and the US, with sales in the former rising 2 percentage points to account for 14 percent of the company’s total sales, and those in the latter increasing by 1 percentage point to 12 percent, compared with the previous year.
However, total revenue declined 9.5 percent year-on-year to NT$116.7 billion (US$3.6 million) last year from the previous year due to weakening demand, with net income falling to NT$12.78 billion from the previous year’s NT$16.02 billion affected by high operating expenses, company data showed.
“We are hoping the company’s revenue this year will be higher than last year to help cover marketing and research costs,” Lo said.
Credit Suisse Group AG last month said that Cheng Shin’s revenue for this year could grow by a mid-single digit percentage from last year, citing stabilizing prices in its products and improving volume outlook in the near term.
“Demand has been better post-Chinese New Year holiday on supply tightness caused by closures of small local tire makers,” Credit Suisse analysts said in a note issued on March 28, adding that demand for passenger car radial tires is resilient. Credit Suisse also said demand for truck and bus radial tires is still weak, but stabilizing, while that for two-wheelers began to show signs of tapering off in the second half of last year.
With growing popularity of radial tires, shipments of Cheng Shin's inner tube products fell to 199 million units last year from 246 million in 2014, the company said.
Inner tubes, which accounted for 7 percent of Cheng Shin's total products by sales last year, will continue to fall going forward, the company said.
Shares of Cheng Shin have outperformed the broader market by about 16 percent so far this year, closing at NT$63 yesterday.
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