Sat, May 20, 2017 - Page 12 News List

Lu Hai expanding output with eye on Southeast Asia

By Kuo Chia-erh  /  Staff reporter

Lu Hai Holding Corp (六暉), which makes valve stems for tires, said it aims to expand its monthly production capacity from 60 million units to 66 million units by the end of this year, eyeing a growing motorcycle market in Southeast Asia.

“We plan to raise capacity at our Indonesian plant to distribute more products to customers [in the region],” Lu Hai chairman Wu Chin-lu (吳金鹿) said at an investors’ conference on Thursday.

The world’s largest tire valve manufacturer said it is also considering building a new plant in Xiamen, China, in an effort to sustain its competitiveness.

In the first quarter of this year, the company saw its net profit grow 31.8 percent annually from NT$65.53 million to NT$86.4 million (US$2.17 million to US$2.86 million), with earnings per share rising from NT$0.88 to NT$1.16, buoyed by optimistic sentiment in the global automotive market.

Sales over the period rose 10 percent from NT$617.4 million to NT$679.1 million, a filing with the Taiwan Stock Exchange showed.

Gross margin climbed to 28.29 percent in the first three months of the year, up from 25.14 percent a year earlier, company data showed.

The improvement in margin was partly due to better material controls, Lu Hai said.

Aided by an improved manufacturing process for recycled copper, the company has become less vulnerable to fluctuating material prices, the company said.

Copper makes up nearly 75 percent of the company’s material costs, company data showed.

The company voiced optimism about its sales outlook for the coming quarters, as the tire-making industry is about to enter its high season.

Citing better order visibility, the company also expects growing global demand for tire-pressure monitoring systems (TPMS), which offer greater gross margins than the company’s other products.

Revenue contribution from TPMS valve stems was less than 5 percent of the company’s total sales last quarter, while valve stems for motorcycles remained the largest contributor at 36.55 percent, company data showed.

Cayman Islands-registered Lu Hai counts Taiwan’s Cheng Shin Rubber Industry Co (正新橡膠) and Kenda Rubber Industrial Co (建大輪胎), as well as South Korea’s Nexen Tire Corp, among its major customers.

Last year as a whole, the company posted record-high net profit of NT$318 million, a 29.2 percent surge from the previous year, with earnings per share of NT$4.27.

Based on last year’s earnings, the company has proposed the distribution of a cash dividend of NT$1, which indicated a yield of 1.63 percent based on its stock price of NT$61.5 yesterday.

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