Despite slowing orders from Nike Inc, Feng Tay Enterprises Co’s (豐泰企業) overseas production expansion strategy would remain unchanged and its second plant in India would begin operations in the second half of next year, a company spokesman said yesterday.
Nike said late last month that orders for the North American market in the third quarter would grow only 6 percent annually.
“As Feng Tay generates 80 percent of its revenue from Nike, we recommend investors switch to other stocks in the sector with better gross margins, stronger pricing power and more sales contribution from China,” Yuanta Securities Investment Consulting Co (元大投顧) analyst Peggy Shih (施姵帆) said in a note to clients last month.
Despite pessimistic market expectations, Feng Tay spokesman Joe Lin (林國仲) said by telephone that the company’s long-term overseas expansion strategy would not change because of a possible decline in demand from Nike.
Lin added that based on experience, weakening demand in a coming quarter just reflects an inventory adjustment in the short term.
At a shareholders’ meeting last month, company executives said that Feng Tay’s plans would focus on “two paths.”
The first would be to focus on the operations of its headquarters in Taiwan, raising capital for investment in product research and development, while the second path would be to expand its plants in India, Vietnam and Indonesia to increase capacity, they said.
As one of many Taiwanese companies shifting production to South and Southeast Asia, Feng Tay is working on two major expansion plans: acquiring land in Indonesia for a new plant, and establishing another factory in India, Lin said.
The company has established one plant in the southern Indian town of Cheyyar, while a second plant in the nearby town of Bargur is under construction and is scheduled to begin operations in the second half of next year, he said.
The Bargur plant is to mainly produce casual and relatively low-priced shoes, he said.
Feng Tay reported a record-high revenue of NT$14.21 billion (US$441.2 million) for the first quarter of this year, a year-on-year increase of 15.17 percent, driven by growing orders and increased contribution from its overseas plants, company data showed.
Earnings per share reached NT$1.53 in the first quarter, compared with NT$1.45 in the same period last year, data showed.
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